Question 1

Interest payable on a loan becomes a liability:

Accepted Answer

A) When the note payable is issued. 
B) As it accrues. 
C) At the maturity date. 
D) When the borrowed money is received. 
A) When the note payable is issued. 
B) As it accrues. 
C) At the maturity date. 
D) When the borrowed money is received. B

Question 2

If a bond is issued at a premium,the company receives more money for the bond than it will have to pay back at the end of the bond's life,and as a result the company records no interest expense over the life of the bond.

Accepted Answer

A) True 
 B)False  False

Question 3

Which one of the following would cause a lease to be accounted for as a capital lease?

Accepted Answer

A) The lease payments are greater than $10,000 per month. 
B) The leased property is located on premises owned by the lessee. 
C) The lease term is more than 75% of economic life of the property. 
D) The value of the leased property is greater than 10% of the net assets of the lessee. 
A) The lease payments are greater than $10,000 per month. 
B) The leased property is located on premises owned by the lessee. 
C) The lease term is more than 75% of economic life of the property. 
D) The value of the leased property is greater than 10% of the net assets of the lessee. C

Question 4

When a company has a fully funded pension plan,they only need to record the present value of pension payments as a current liability.

Accepted Answer

A) True 
 B)False

Question 5

When bonds are sold by one investor to another,they sell at market price plus accrued interest since the last payment date.

Accepted Answer

A) True 
 B)False

Question 6

A pension fund is an independent entity managed by a bank or insurance company.

Accepted Answer

A) True 
 B)False

Question 7

An operating lease:

Accepted Answer

A) Creates an asset and a liability on the balance sheet. 
B) Is a form of off-balance sheet financing. 
C) Is always preferable to a capital lease. 
D) Transfers title to the asset being leased. 
A) Creates an asset and a liability on the balance sheet. 
B) Is a form of off-balance sheet financing. 
C) Is always preferable to a capital lease. 
D) Transfers title to the asset being leased.

Question 8

Which of the following payroll costs are shared equally by the employer and the employee?

Accepted Answer

A) State unemployment taxes. 
B) Workers' compensation. 
C) Social security. 
D) Federal unemployment taxes. 
A) State unemployment taxes. 
B) Workers' compensation. 
C) Social security. 
D) Federal unemployment taxes.

Question 9

Accounts payable are often subdivided into the categories of trade accounts payable and notes payable.

Accepted Answer

A) True 
 B)False

Question 10

If a long-term debt is to be paid off in monthly installments over a 5-year period,the entire principal should be classified as a long-term debt.

Accepted Answer

A) True 
 B)False

Question 11

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 12

If a bond is callable,the call price is usually lower than the face value of the bond.

Accepted Answer

A) True 
 B)False

Question 13

Notes payable
On September 1,2015,Charles Associates borrowed $600,000 from Diana Credit Union and signed a 9%,one-year note payable,all due at maturity.

Accepted Answer

(a)$654,000 [$600,000 + ($600,

Question 14

The market value of a convertible bond tends to move inversely to the market value of an equivalent number of shares of common stock.

Accepted Answer

A) True 
 B)False

Question 15

Premium on bonds payable:

Accepted Answer

A) Is an asset account. 
B) Increases the carrying value of the liability. 
C) Is a contra-asset account. 
D) Is disclosed by a footnote. 
A) Is an asset account. 
B) Increases the carrying value of the liability. 
C) Is a contra-asset account. 
D) Is disclosed by a footnote.

Question 16

The unpaid balance column on an amortization table for a note payable shows the amount the debtor could pay to settle the liability at a particular point in time.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A call provision on a bond:

Accepted Answer

A) Permits the corporation to redeem the bonds at a specified price. 
B) Allows the corporation to revise the stated interest rate. 
C) Allows the corporation to revise the maturity date. 
D) Always creates the lowest price at which the bond will sell for. 
A) Permits the corporation to redeem the bonds at a specified price. 
B) Allows the corporation to revise the stated interest rate. 
C) Allows the corporation to revise the maturity date. 
D) Always creates the lowest price at which the bond will sell for.

Question 19

A capital lease is recorded in the accounting records of the lessee by an entry:

Accepted Answer

A) Debiting Rent Expense and crediting Cash each time a lease payment is made. 
B) Debiting Cash and crediting Rental Revenue each time a lease payment is received. 
C) Debiting an asset account and crediting a liability account for the present value of the future lease payments. 
D) Debiting an asset account and crediting Sales for the present value of the future lease payments. 
A) Debiting Rent Expense and crediting Cash each time a lease payment is made. 
B) Debiting Cash and crediting Rental Revenue each time a lease payment is received. 
C) Debiting an asset account and crediting a liability account for the present value of the future lease payments. 
D) Debiting an asset account and crediting Sales for the present value of the future lease payments.

Question 20

When a company sells bonds,the bondholders are permitted to vote for the board of directors.

Accepted Answer

A) True 
 B)False

Exam 10: Liabilities

Interest payable on a loan becomes a liability:

If a bond is issued at a premium,the company receives more money for the bond than it will have to pay back at the end of the bond's life,and as a result the company records no interest expense over the life of the bond.

Which one of the following would cause a lease to be accounted for as a capital lease?

When a company has a fully funded pension plan,they only need to record the present value of pension payments as a current liability.

When bonds are sold by one investor to another,they sell at market price plus accrued interest since the last payment date.

A pension fund is an independent entity managed by a bank or insurance company.

An operating lease:

Which of the following payroll costs are shared equally by the employer and the employee?

Accounts payable are often subdivided into the categories of trade accounts payable and notes payable.

If a long-term debt is to be paid off in monthly installments over a 5-year period,the entire principal should be classified as a long-term debt.

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

If a bond is callable,the call price is usually lower than the face value of the bond.

Notes payable On September 1,2015,Charles Associates borrowed $600,000 from Diana Credit Union and signed a 9%,one-year note payable,all due at maturity.

The market value of a convertible bond tends to move inversely to the market value of an equivalent number of shares of common stock.

Premium on bonds payable:

The unpaid balance column on an amortization table for a note payable shows the amount the debtor could pay to settle the liability at a particular point in time.

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

A call provision on a bond:

A capital lease is recorded in the accounting records of the lessee by an entry:

When a company sells bonds,the bondholders are permitted to vote for the board of directors.

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

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