Exam 10: Reporting and Interpreting Liabilities

ABC Company is in the process of issuing bonds.The bonds have a stated interest rate of 6%,which is 2% above the current market rate.What effect will the two interest rates have on the bond issue price?

(Multiple Choice)

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Question 201

The threshold for recording contingent liabilities under IFRS is higher than that under GAAP.

(True/False)

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Question 202

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

(Multiple Choice)

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Question 203

Use the information above to answer the following question.What is the total amount of interest expense that will be recorded over the life of these bonds?

(Multiple Choice)

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Question 204

Which of the following accounts could have a non-zero balance on a post-closing trial balance?

(Multiple Choice)

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Question 205

The straight-line method of amortization allocates the amount of bond premium or discount over each period of a bond's life in amounts corresponding to the bond's carrying value.

(True/False)

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Question 206

When the effective-interest method of amortization is used,what happens to interest expense as a bond moves toward maturity?

(Multiple Choice)

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Question 207

In October,you sign a note for $50,000 in order to buy new equipment.The note is due in five years,at 8% annual interest.Semiannual interest payments are due each March and September.Assuming no other long-term debt,what is the initial balance in the related long-term debt account?

(Multiple Choice)

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Question 208

Choose the appropriate letter to match the term and the definition.Not all definitions will be used. Term: 1.___ Convertible 2._ Carrying value 3._ Discount 4._ Callable 5._ Maturity 6._ Market interest rate 7._ Stated interest rate 8.___ Premium Definition: A.A bond feature that changes the interest rate on the bond with market conditions. B.When a bond is issued for a price less than its face value. C.Also known as the face value or par value of a bond. D.A bond with the feature that allows creditors to exchange the bond for company stock. E.The interest rate printed on the bond certificate. F.A bond with the feature that lets creditors examine financial data and demand new loan conditions. G.The amount a company receives when it sells a bond; also known as issue price. H.When a bond is issued for a price greater than its face value. I.A bond with the feature that allows the borrowing company to pay off a bond whenever it wishes. J.Rate of interest that investors demand from a bond. K.The time at which the face value of a bond must be paid to the lender. L.Is multiplied by the market interest rate to calculate the (effective)interest expense on a bond.

(Short Answer)

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Question 209

Unearned revenues are liabilities because:

(Multiple Choice)

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Question 210

The times interest earned ratio for Bodhaine's Orchard was 8.52 in 2014,6.63 in 2015,and 2.74 in 2016.What is the most likely interpretation of this ratio?

(Multiple Choice)

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Question 211

On January 1,ABC,Inc.,issued $100,000 of 10%,5year bonds on January 1,2015,for $92,280.Interest is due semiannually.When ABC records the first interest payment,which will be greater the debit to Interest Expense or the credit to Cash?

(Multiple Choice)

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Question 212

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

(Multiple Choice)

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Question 213

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

(Multiple Choice)

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Question 214

The entry to record the initial borrowing of cash by issuing a promissory note will include a debit to and a credit to :

(Multiple Choice)

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Question 215

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

(Multiple Choice)

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Question 216

At the beginning of the year,your company borrows $20,000 by signing a four-year promissory note that states an annual interest rate of 8% plus principal repayments of $5,000 each year.Interest is paid at the end of the second and fourth quarters,whereas principal payments are due at the end of each year.How does this new promissory note affect the current and non-current liability amounts reported on the classified balance sheet prepared at the end of the first quarter?

(Multiple Choice)

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Question 217

On November 1,2015,ABC Corp.borrowed $100,000 cash on a 1year note payable with a 6% annual rate that requires ABC to pay all the interest as well as the principal on October 31,2016.Assuming the November 1 transaction was properly recorded,how would the December 31,2015,year-end adjusting entry affect the accounting equation?

(Multiple Choice)

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Question 218

When preparing the balance sheet for AAA,Inc.for December 31,2015,which item would not be classified as a current liability?

(Multiple Choice)

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Question 219

A corporate bond with a face value of $1,000 is issued at 107.This means that the bond actually sold for:

(Multiple Choice)

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Question 220

Showing 201 - 220 of 235

ABC Company is in the process of issuing bonds.The bonds have a stated interest rate of 6%,which is 2% above the current market rate.What effect will the two interest rates have on the bond issue price?

The threshold for recording contingent liabilities under IFRS is higher than that under GAAP.

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

Use the information above to answer the following question.What is the total amount of interest expense that will be recorded over the life of these bonds?

Which of the following accounts could have a non-zero balance on a post-closing trial balance?

The straight-line method of amortization allocates the amount of bond premium or discount over each period of a bond's life in amounts corresponding to the bond's carrying value.

When the effective-interest method of amortization is used,what happens to interest expense as a bond moves toward maturity?

In October,you sign a note for $50,000 in order to buy new equipment.The note is due in five years,at 8% annual interest.Semiannual interest payments are due each March and September.Assuming no other long-term debt,what is the initial balance in the related long-term debt account?

Unearned revenues are liabilities because:

The times interest earned ratio for Bodhaine's Orchard was 8.52 in 2014,6.63 in 2015,and 2.74 in 2016.What is the most likely interpretation of this ratio?

On January 1,ABC,Inc.,issued $100,000 of 10%,5year bonds on January 1,2015,for $92,280.Interest is due semiannually.When ABC records the first interest payment,which will be greater the debit to Interest Expense or the credit to Cash?

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

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

The entry to record the initial borrowing of cash by issuing a promissory note will include a debit to and a credit to :

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

When preparing the balance sheet for AAA,Inc.for December 31,2015,which item would not be classified as a current liability?

A corporate bond with a face value of $1,000 is issued at 107.This means that the bond actually sold for:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 10: Reporting and Interpreting Liabilities

ABC Company is in the process of issuing bonds.The bonds have a stated interest rate of 6%,which is 2% above the current market rate.What effect will the two interest rates have on the bond issue price?

The threshold for recording contingent liabilities under IFRS is higher than that under GAAP.

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

Use the information above to answer the following question.What is the total amount of interest expense that will be recorded over the life of these bonds?

Which of the following accounts could have a non-zero balance on a post-closing trial balance?

The straight-line method of amortization allocates the amount of bond premium or discount over each period of a bond's life in amounts corresponding to the bond's carrying value.

When the effective-interest method of amortization is used,what happens to interest expense as a bond moves toward maturity?

In October,you sign a note for $50,000 in order to buy new equipment.The note is due in five years,at 8% annual interest.Semiannual interest payments are due each March and September.Assuming no other long-term debt,what is the initial balance in the related long-term debt account?

Unearned revenues are liabilities because:

The times interest earned ratio for Bodhaine's Orchard was 8.52 in 2014,6.63 in 2015,and 2.74 in 2016.What is the most likely interpretation of this ratio?

On January 1,ABC,Inc.,issued $100,000 of 10%,5year bonds on January 1,2015,for $92,280.Interest is due semiannually.When ABC records the first interest payment,which will be greater the debit to Interest Expense or the credit to Cash?

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

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

The entry to record the initial borrowing of cash by issuing a promissory note will include a debit to ______ and a credit to ______:

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

When preparing the balance sheet for AAA,Inc.for December 31,2015,which item would not be classified as a current liability?

A corporate bond with a face value of $1,000 is issued at 107.This means that the bond actually sold for:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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The entry to record the initial borrowing of cash by issuing a promissory note will include a debit to and a credit to :