Question 1

Employees' annual "take-home-pay," totals approximately:

Accepted Answer

A)  $672,300. 
B)  $762,300. 
C)  $675,000. 
D)  $741,150. 
A)  $672,300. 
B)  $762,300. 
C)  $675,000. 
D)  $741,150.

Question 2

How much must Able pay Regal Corporation on September 1, 2010, when the note matures?

Accepted Answer

A)  $600,000. 
B)  $618,000. 
C)  $654,000. 
D)  Some other amount. 
A)  $600,000. 
B)  $618,000. 
C)  $654,000. 
D)  Some other amount.

Question 3

If a bond is issued at par and between interest dates:

Accepted Answer

A)  The cash received by the corporation will be less than the face value of the bond. 
B)  The cash received by the corporation will be greater than the face value of the bond. 
C)  The cash received by the corporation will be the same as the face value of the bond. 
D)  Interest receivable will be debited. 
A)  The cash received by the corporation will be less than the face value of the bond. 
B)  The cash received by the corporation will be greater than the face value of the bond. 
C)  The cash received by the corporation will be the same as the face value of the bond. 
D)  Interest receivable will be debited.

Question 4

What is the amount of bond interest expense that appears in Seaview's Year 2 income statement relating to these bonds?
$_________________________
What is the amount of accrued bond interest expense that appears in Seaview's balance sheet at December 31, Year 2, with respect to these bonds?
$_________________________
Seaview exercises the call provision and retires one-half of the bond issue on July, 1, Year 4. Prepare the journal entry to record this transaction on July 1, Year 4.

Accepted Answer

@#IMG-DLM& On December 1, 2009, Fisher Corporation

Question 5

Some of the payroll-related expenses incurred by Rockland Corporation are mandated by law, rather than negotiated with employees. During the current year, these mandated amounts increased Rockland's payroll-related expenses by approximately:

Accepted Answer

A)  $101,200. 
B)  $96,000. 
C)  $117,200. 
D)  $118,800. 
A)  $101,200. 
B)  $96,000. 
C)  $117,200. 
D)  $118,800.

Question 6

Social security and Medicare taxes have a cap on employees' salaries where the tax is ended.

Accepted Answer

A) True 
 B)False

Question 7

Management has both the intent and the ability to refinance a liability maturing in four months by taking out a new loan at the due date, which would not be due for several years. How would this situation be reported in financial statements prepared as of today's date?

Accepted Answer

A)  The original liability is classified as current, with a footnote describing management's plan for refinancing. 
B)  The original liability is classified as current and the new loan is reported as a long-term liability. 
C)  The original liability is classified as long-term; the new loan is not included in liabilities at this date. 
D)  The original liability need not be reported at all; only the new loan is reported as a long-term liability. 
A)  The original liability is classified as current, with a footnote describing management's plan for refinancing. 
B)  The original liability is classified as current and the new loan is reported as a long-term liability. 
C)  The original liability is classified as long-term; the new loan is not included in liabilities at this date. 
D)  The original liability need not be reported at all; only the new loan is reported as a long-term liability.

Question 8

The adjustment necessary at December 31, Year 1 (if any), related to this bond issue involves:

Accepted Answer

A)  Recognition of interest expense of $3,600,000. 
B)  Recognition of interest expense of $1,800,000. 
C)  Payment of cash of $1,800,000. 
D)  There is no adjustment necessary. 
A)  Recognition of interest expense of $3,600,000. 
B)  Recognition of interest expense of $1,800,000. 
C)  Payment of cash of $1,800,000. 
D)  There is no adjustment necessary.

Question 9

Companies may understate liabilities so as not to be perceived as risky by credit rating agencies.

Accepted Answer

A) True 
 B)False

Question 10

The company's annual payroll-related expenses amount to approximately:

Accepted Answer

A)  $1,085,600. 
B)  $1,181,850. 
C)  $1,250,700. 
D)  $900,000. 
A)  $1,085,600. 
B)  $1,181,850. 
C)  $1,250,700. 
D)  $900,000.

Question 11

A high interest coverage ratio is a sign of creditworthiness.

Accepted Answer

A) True 
 B)False

Question 12

Dividends paid by a corporation to its stockholders are tax deductible by the corporation but interest paid on bonds is not.

Accepted Answer

A) True 
 B)False

Question 13

Some of the payroll-related expenses incurred by Stone Corporation are mandated by law, rather than negotiated with employees. During the current year, these mandated amounts increased Stone's payroll-related expenses by approximately:

Accepted Answer

A)  $68,850. 
B)  $200,700. 
C)  $131,850. 
D)  $176,850. 
A)  $68,850. 
B)  $200,700. 
C)  $131,850. 
D)  $176,850.

Question 14

What is the aggregate amount paid by Fisher over the 30-year life of the mortgage?
$________

Accepted Answer

$1,481,760

Question 15

The Music House issues a contract to a new recording artist to produce a number of albums over the next five years at $1 million per album. This situation is an example of:

Accepted Answer

A)  A contingent liability which should be recorded in the accounting records. 
B)  A contingent liability requiring footnote disclosure. 
C)  An estimated liability, since the number of albums to be produced is not yet determined. 
D)  A commitment which, if material, may be disclosed in a footnote. 
A)  A contingent liability which should be recorded in the accounting records. 
B)  A contingent liability requiring footnote disclosure. 
C)  An estimated liability, since the number of albums to be produced is not yet determined. 
D)  A commitment which, if material, may be disclosed in a footnote.

Question 16

The entry made by Webster Company to record issuance of the bonds payable at December 31, 2011, includes:

Accepted Answer

A)  A debit to Cash of $1,000,000. 
B)  A debit to Discount on Bonds Payable of $30,000. 
C)  A credit to Bonds Payable of $970,000. 
D)  A credit to Bond Interest Payable of $30,000. 
A)  A debit to Cash of $1,000,000. 
B)  A debit to Discount on Bonds Payable of $30,000. 
C)  A credit to Bonds Payable of $970,000. 
D)  A credit to Bond Interest Payable of $30,000.

Question 17

Using different accounting methods on financial statements and tax returns will create:

Accepted Answer

A)  No effect upon the balance sheet, only the income statement. 
B)  No effect upon the balance sheet nor the income statement. 
C)  A deferred tax liability. 
D)  An illegal situation. 
A)  No effect upon the balance sheet, only the income statement. 
B)  No effect upon the balance sheet nor the income statement. 
C)  A deferred tax liability. 
D)  An illegal situation.

Question 18

In the marketplace, bond prices tend to fluctuate directly with changes in interest rates.

Accepted Answer

A) True 
 B)False

Question 19

Deferred taxes are classified as:

Accepted Answer

A)  Only a liability. 
B)  Only an asset. 
C)  Either an asset or liability, depending upon the situation. 
D)  A non-operating expense. 
A)  Only a liability. 
B)  Only an asset. 
C)  Either an asset or liability, depending upon the situation. 
D)  A non-operating expense.

Question 20

The term "junk bonds" describes bonds with:

Accepted Answer

A)  Low interest rates. 
B)  Indefinite maturity dates. 
C)  Low maturity values. 
D)  High risk. 
A)  Low interest rates. 
B)  Indefinite maturity dates. 
C)  Low maturity values. 
D)  High risk.

Exam 10: Liabilities

Employees' annual "take-home-pay," totals approximately:

How much must Able pay Regal Corporation on September 1, 2010, when the note matures?

If a bond is issued at par and between interest dates:

Some of the payroll-related expenses incurred by Rockland Corporation are mandated by law, rather than negotiated with employees. During the current year, these mandated amounts increased Rockland's payroll-related expenses by approximately:

Social security and Medicare taxes have a cap on employees' salaries where the tax is ended.

Management has both the intent and the ability to refinance a liability maturing in four months by taking out a new loan at the due date, which would not be due for several years. How would this situation be reported in financial statements prepared as of today's date?

The adjustment necessary at December 31, Year 1 (if any), related to this bond issue involves:

Companies may understate liabilities so as not to be perceived as risky by credit rating agencies.

The company's annual payroll-related expenses amount to approximately:

A high interest coverage ratio is a sign of creditworthiness.

Dividends paid by a corporation to its stockholders are tax deductible by the corporation but interest paid on bonds is not.

Some of the payroll-related expenses incurred by Stone Corporation are mandated by law, rather than negotiated with employees. During the current year, these mandated amounts increased Stone's payroll-related expenses by approximately:

What is the aggregate amount paid by Fisher over the 30-year life of the mortgage? $________

The Music House issues a contract to a new recording artist to produce a number of albums over the next five years at $1 million per album. This situation is an example of:

The entry made by Webster Company to record issuance of the bonds payable at December 31, 2011, includes:

Using different accounting methods on financial statements and tax returns will create:

In the marketplace, bond prices tend to fluctuate directly with changes in interest rates.

Deferred taxes are classified as:

The term "junk bonds" describes bonds with:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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