Question 1

When a bond sells at a discount,its stated interest rate is ________.

Accepted Answer

A) equal to the market rate of interest 
B) greater than the market rate of interest 
C) less than the market rate of interest 
D) irrelevant to investors 
A) equal to the market rate of interest 
B) greater than the market rate of interest 
C) less than the market rate of interest 
D) irrelevant to investors

Question 2

On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.To calculate the amount of cash that Alpha received,you must find ________.

Accepted Answer

A) only the present value of $1,000,000 
B) only the present value of an annuity of $60,000 
C) both the present value of $1,000,000 and the present value of an annuity of $50,000 
D) both the present value of $1,000,000 and the present value of an annuity of $60,000 
A) only the present value of $1,000,000 
B) only the present value of an annuity of $60,000 
C) both the present value of $1,000,000 and the present value of an annuity of $50,000 
D) both the present value of $1,000,000 and the present value of an annuity of $60,000

Question 3

Ken's Kandy prepared the following preliminary balance sheet a few days before its December 31 yearend:
 Ken is concerned about the size of the accounts payable in relation to the company's cash and other current assets.He asks the accountant to reclassify $3,000 of the accounts payable as long-term notes payable before releasing the annual report on December 31.
a.What is the company's current ratio now,based on the preliminary balance sheet?
The formula for calculating the current ratio is current assets / current liabilities.
b.What will the company's current ratio be if $3,000 of the accounts payable are reclassified as long-term notes payable?
c.Will reclassifying the accounts payable have any effect on the debt-to-equity ratio? Explain.
d.Is it ethical to reclassify current liabilities as long-term liabilities,as long as total liabilities are correct?

Accepted Answer

a.0.875 to 1 = ($1,000 + 2,000 + 500)/ $

Question 4

On January 1,2011,Ace Electronics borrowed $40,000 on a five-year,7% note.The loan will be repaid in 5 equal installments of $9,756 each year,beginning on December 31,2011.Notes payable at December 31,2012 will be ________ notes payable at December 31,2011.

Accepted Answer

A) higher than 
B) the same as 
C) lower than 
D) The answer cannot be determined from the information given. 
A) higher than 
B) the same as 
C) lower than 
D) The answer cannot be determined from the information given.

Question 5

On November 1,2011,The Mane Event,Inc.borrowed $40,000 from a local bank for 24 months at 11% annual interest.Both principal and interest are due when the note matures.Which statement below is TRUE?

Accepted Answer

A) The note is a current-term liability on the balance sheet at Dec.31,2011. 
B) The note is a long-term liability on the balance sheet at Dec.31,2012. 
C) The transaction represents an investing activity. 
D) The transaction represents a financing activity. 
A) The note is a current-term liability on the balance sheet at Dec.31,2011. 
B) The note is a long-term liability on the balance sheet at Dec.31,2012. 
C) The transaction represents an investing activity. 
D) The transaction represents a financing activity.

Question 6

In December 2010,Bob Cratchit worked for Scrooge & Marley and earned $1,000.Federal income tax withholding is 10%.The FICA rate is 6.2% and the Medicare tax is 1.45%.What is Bob's net pay?

Accepted Answer

A) $1,000 
B) $823.50 
C) $900 
D) $923.50 
A) $1,000 
B) $823.50 
C) $900 
D) $923.50

Question 7

ABC Company borrows $15,000 from a local bank for six months at 9% annual interest.Which statement below is TRUE?

Accepted Answer

A) It is a definitely determinable liability. 
B) It is a long-term liability. 
C) It is an estimated liability. 
D) Interest expense of $225 will be recorded each month the loan is outstanding. 
A) It is a definitely determinable liability. 
B) It is a long-term liability. 
C) It is an estimated liability. 
D) Interest expense of $225 will be recorded each month the loan is outstanding.

Question 8

If a bond is sold at a premium,the carrying value reported on the balance sheet in subsequent years ________.

Accepted Answer

A) stays the same each year 
B) increases each year 
C) decreases each year 
D) changes every year as the market rate of interest changes 
A) stays the same each year 
B) increases each year 
C) decreases each year 
D) changes every year as the market rate of interest changes

Question 9

The debt-to-equity ratio ________.

Accepted Answer

A) is total shareholders' equity divided by total liabilities 
B) is total liabilities divided by total shareholders' equity 
C) describes a company's ability to make the interest payments on its debt 
D) measures the firms' ability to pay its bills on time 
A) is total shareholders' equity divided by total liabilities 
B) is total liabilities divided by total shareholders' equity 
C) describes a company's ability to make the interest payments on its debt 
D) measures the firms' ability to pay its bills on time

Question 10

Use the following information taken from a financial website to answer the following question(s):
 
-Refer to the information above.Is the carrying value of Ford MTR's bonds higher or lower than the face value of its bonds?

Accepted Answer

A) higher 
B) lower 
C) the same 
D) The answer cannot be determined from the information given. 
A) higher 
B) lower 
C) the same 
D) The answer cannot be determined from the information given.

Question 11

Show the effect on the accounting equation of:  
a.)purchasing the truck by signing a $35,000 installment note and 
b.)the entry to record the first payment.
  
c.Will leasing the truck require different entries?
d.Is it ethical for a company to acquire the use of assets by renting them?

Accepted Answer

(Principles students have not

Question 12

An employee's gross pay is recorded as an expense on the employer's books.

Accepted Answer

A) True 
 B)False

Question 13

Bank,Rupp & Baroque,Inc.borrowed $100,000 at 6% for two years,to be repaid in equal monthly installments over the life of the loan.Calculate the total amount of interest Bank,Rupp & Baroque will pay on this loan.

Accepted Answer

To calculate monthly payments,use a 0.5%

Question 14

Beau Brentley earned $60,000 from his job at Bridgestone Tires.He had 15% of his gross pay withheld for federal income taxes,6.2% withheld for FICA Social Security taxes,and 1.45% withheld for Medicare taxes.What was Beau's net pay?

Accepted Answer

A) $48,200 
B) $46,410 
C) $48,000 
D) $60,000 
A) $48,200 
B) $46,410 
C) $48,000 
D) $60,000

Question 15

Beau Brentley earned $60,000 in 2011 from his job at Bridgestone Tires.He had 15% of his gross pay withheld for federal income taxes,6.2% withheld for FICA Social Security taxes,and 1.45% withheld for Medicare taxes.What amount will Bridgestone Tires report as payroll tax expense when it pays these taxes?

Accepted Answer

A) $13,590 
B) $4,590 
C) $27,180 
D) $9,160 
A) $13,590 
B) $4,590 
C) $27,180 
D) $9,160

Question 16

Discounting means trying to negotiate a cheaper interest rate for a loan.

Accepted Answer

A) True 
 B)False

Question 17

Bank,Rupp & Baroque,Inc.borrowed $100,000 at 6% for two years,to be repaid in equal monthly installments over the life of the loan.Calculate the amount of the monthly payments.

Accepted Answer

To calculate monthly payments,

Question 18

The risk associated with debt is risk to ________.

Accepted Answer

A) the borrowing company 
B) the issuing company's creditors 
C) financial analysts following a company 
D) positive financial leverage 
A) the borrowing company 
B) the issuing company's creditors 
C) financial analysts following a company 
D) positive financial leverage

Question 19

On October 31,2011,Bondable,Inc.issued $20,000 of 10-year,6% bonds at 100.The bonds pay interest annually on October 31.On its statement of cash flows for the year ended December 31,2011,Bondable will show Cash paid for interest of ________.

Accepted Answer

A) $0 
B) $(200)in the cash flows from financing activities section of the statement 
C) $(1,200)in the cash flows from operating activities section of the statement 
D) $(120)in the cash flows from operating activities section of the statement 
A) $0 
B) $(200)in the cash flows from financing activities section of the statement 
C) $(1,200)in the cash flows from operating activities section of the statement 
D) $(120)in the cash flows from operating activities section of the statement

Question 20

Bondholders are considered owners of a company.

Accepted Answer

A) True 
 B)False

When a bond sells at a discount,its stated interest rate is ________.

On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.To calculate the amount of cash that Alpha received,you must find ________.

On January 1,2011,Ace Electronics borrowed $40,000 on a five-year,7% note.The loan will be repaid in 5 equal installments of $9,756 each year,beginning on December 31,2011.Notes payable at December 31,2012 will be ________ notes payable at December 31,2011.

On November 1,2011,The Mane Event,Inc.borrowed $40,000 from a local bank for 24 months at 11% annual interest.Both principal and interest are due when the note matures.Which statement below is TRUE?

In December 2010,Bob Cratchit worked for Scrooge & Marley and earned $1,000.Federal income tax withholding is 10%.The FICA rate is 6.2% and the Medicare tax is 1.45%.What is Bob's net pay?

ABC Company borrows $15,000 from a local bank for six months at 9% annual interest.Which statement below is TRUE?

If a bond is sold at a premium,the carrying value reported on the balance sheet in subsequent years ________.

The debt-to-equity ratio ________.

Use the following information taken from a financial website to answer the following question(s): -Refer to the information above.Is the carrying value of Ford MTR's bonds higher or lower than the face value of its bonds?

Show the effect on the accounting equation of: a.)purchasing the truck by signing a $35,000 installment note and b.)the entry to record the first payment. c.Will leasing the truck require different entries? d.Is it ethical for a company to acquire the use of assets by renting them?

An employee's gross pay is recorded as an expense on the employer's books.

Bank,Rupp & Baroque,Inc.borrowed $100,000 at 6% for two years,to be repaid in equal monthly installments over the life of the loan.Calculate the total amount of interest Bank,Rupp & Baroque will pay on this loan.

Beau Brentley earned $60,000 from his job at Bridgestone Tires.He had 15% of his gross pay withheld for federal income taxes,6.2% withheld for FICA Social Security taxes,and 1.45% withheld for Medicare taxes.What was Beau's net pay?

Discounting means trying to negotiate a cheaper interest rate for a loan.

Bank,Rupp & Baroque,Inc.borrowed $100,000 at 6% for two years,to be repaid in equal monthly installments over the life of the loan.Calculate the amount of the monthly payments.

The risk associated with debt is risk to ________.

On October 31,2011,Bondable,Inc.issued $20,000 of 10-year,6% bonds at 100.The bonds pay interest annually on October 31.On its statement of cash flows for the year ended December 31,2011,Bondable will show Cash paid for interest of ________.

Bondholders are considered owners of a company.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

The Purchase and Sale of Inventory

Acquisition and Use of Long-Term Assets

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Quality of Earnings, corporate Governance, and Ifrs

Filters

Exam 7: Accounting for Liabilities

When a bond sells at a discount,its stated interest rate is ________.

On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.To calculate the amount of cash that Alpha received,you must find ________.

On January 1,2011,Ace Electronics borrowed $40,000 on a five-year,7% note.The loan will be repaid in 5 equal installments of $9,756 each year,beginning on December 31,2011.Notes payable at December 31,2012 will be ________ notes payable at December 31,2011.

On November 1,2011,The Mane Event,Inc.borrowed $40,000 from a local bank for 24 months at 11% annual interest.Both principal and interest are due when the note matures.Which statement below is TRUE?

In December 2010,Bob Cratchit worked for Scrooge & Marley and earned $1,000.Federal income tax withholding is 10%.The FICA rate is 6.2% and the Medicare tax is 1.45%.What is Bob's net pay?

ABC Company borrows $15,000 from a local bank for six months at 9% annual interest.Which statement below is TRUE?

If a bond is sold at a premium,the carrying value reported on the balance sheet in subsequent years ________.

The debt-to-equity ratio ________.

Use the following information taken from a financial website to answer the following question(s): -Refer to the information above.Is the carrying value of Ford MTR's bonds higher or lower than the face value of its bonds?

Show the effect on the accounting equation of: a.)purchasing the truck by signing a $35,000 installment note and b.)the entry to record the first payment. c.Will leasing the truck require different entries? d.Is it ethical for a company to acquire the use of assets by renting them?

An employee's gross pay is recorded as an expense on the employer's books.

Bank,Rupp & Baroque,Inc.borrowed $100,000 at 6% for two years,to be repaid in equal monthly installments over the life of the loan.Calculate the total amount of interest Bank,Rupp & Baroque will pay on this loan.

Beau Brentley earned $60,000 from his job at Bridgestone Tires.He had 15% of his gross pay withheld for federal income taxes,6.2% withheld for FICA Social Security taxes,and 1.45% withheld for Medicare taxes.What was Beau's net pay?

Discounting means trying to negotiate a cheaper interest rate for a loan.

Bank,Rupp & Baroque,Inc.borrowed $100,000 at 6% for two years,to be repaid in equal monthly installments over the life of the loan.Calculate the amount of the monthly payments.

The risk associated with debt is risk to ________.

On October 31,2011,Bondable,Inc.issued $20,000 of 10-year,6% bonds at 100.The bonds pay interest annually on October 31.On its statement of cash flows for the year ended December 31,2011,Bondable will show Cash paid for interest of ________.

Bondholders are considered owners of a company.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

The Purchase and Sale of Inventory

Acquisition and Use of Long-Term Assets

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Quality of Earnings, corporate Governance, and Ifrs

Filters