Question 1

Current liabilities are obligations that must be repaid within the shorter of one year or the operating cycle.

Accepted Answer

A) True 
 B)False

Question 2

A $1,000 bond that sells for 104 has a selling price of:

Accepted Answer

A) $1,004. 
B) $1,040. 
C) $1,400. 
D) $1,000. 
A) $1,004. 
B) $1,040. 
C) $1,400. 
D) $1,000.

Question 3

The account Discount on Bonds Payable actually represents interest expense and will be amortized over the life of the bond.

Accepted Answer

A) True 
 B)False

Question 4

The account Discount on Bonds Payable has a debit balance and should appear on the balance sheet as an asset; the account Premium on Bonds Payable has a credit balance and should be classified as a liability.

Accepted Answer

A) True 
 B)False

Question 5

The current portion of long-term debt should be reported:

Accepted Answer

A) Separately in the long-term liabilities section of the balance sheet. 
B) In the long-term liabilities section of the balance sheet,along with the other long-term debt. 
C) In the current liabilities section of the balance sheet. 
D) In a separate section of the balance sheet,between long-term liabilities and shareholders' equity. 
A) Separately in the long-term liabilities section of the balance sheet. 
B) In the long-term liabilities section of the balance sheet,along with the other long-term debt. 
C) In the current liabilities section of the balance sheet. 
D) In a separate section of the balance sheet,between long-term liabilities and shareholders' equity.

Question 6

The amortization of discount on bonds payable reduces the amount of interest expense recognized during the period.

Accepted Answer

A) True 
 B)False

Question 7

When a corporation has a right to redeem bonds in advance of the maturity date,the bond is considered a:

Accepted Answer

A) Convertible bond. 
B) Callable bond. 
C) Junk bond. 
D) Debenture bond. 
A) Convertible bond. 
B) Callable bond. 
C) Junk bond. 
D) Debenture bond.

Question 8

On February 28,2015,$5,000,000 of 6%,10-year bonds payable,dated December 31,2014,are issued.Interest on the bonds is payable semiannually each June 30 and December 31.If the total amount received (including accrued interest)by the issuing corporation is $5,060,000,which of the following is correct?

Accepted Answer

A) The bonds were issued at a premium. 
B) The amount of cash paid to bondholders on the next interest date,June 30,2015,is $300,000. 
C) The amount of cash paid to bondholders on the next interest date,June 30,2015,is $50,000. 
D) The bonds were issued at a discount. 
A) The bonds were issued at a premium. 
B) The amount of cash paid to bondholders on the next interest date,June 30,2015,is $300,000. 
C) The amount of cash paid to bondholders on the next interest date,June 30,2015,is $50,000. 
D) The bonds were issued at a discount.

Question 9

Bonds payable are a means of dividing a very large,long-term liability among many creditors,some of whom may participate in the loan only for a short period of time.

Accepted Answer

A) True 
 B)False

Question 10

Working capital is equal to current assets less current liabilities.

Accepted Answer

A) True 
 B)False

Question 11

A discount on bonds payable is best described as:

Accepted Answer

A) An element of future interest expense. 
B) A bonus paid by the bondholders to the issuing corporation because of the unusually high interest rate stated in the bonds. 
C) The present value of the future interest payments of bond interest and principal. 
D) An amount below par which the bondholders may be called upon to make good. 
A) An element of future interest expense. 
B) A bonus paid by the bondholders to the issuing corporation because of the unusually high interest rate stated in the bonds. 
C) The present value of the future interest payments of bond interest and principal. 
D) An amount below par which the bondholders may be called upon to make good.

Question 12

The withholding of taxes from an employee's pay is a liability to the company.

Accepted Answer

A) True 
 B)False

Question 13

Sinking funds make a bond issue less attractive to the investor.

Accepted Answer

A) True 
 B)False

Question 14

If a business ceases operations and liquidates,which of the following will be paid last?

Accepted Answer

A) Owners. 
B) General creditors. 
C) Employees. 
D) Creditors who have collateral for their loans. 
A) Owners. 
B) General creditors. 
C) Employees. 
D) Creditors who have collateral for their loans.

Question 15

Payments of pensions and other benefits to retired workers are recognized as expense in the period payment is made.

Accepted Answer

A) True 
 B)False

Question 16

The interest coverage ratio:

Accepted Answer

A) Is computed by dividing total liabilities by annual interest expense. 
B) Is computed by dividing liquid assets by annual required interest payment. 
C) Indicates the percentage of total assets that are financed with borrowed money. 
D) Measures the number of times the annual interest expense could be covered by annual income from operations. 
A) Is computed by dividing total liabilities by annual interest expense. 
B) Is computed by dividing liquid assets by annual required interest payment. 
C) Indicates the percentage of total assets that are financed with borrowed money. 
D) Measures the number of times the annual interest expense could be covered by annual income from operations.

Question 17

The interest coverage ratio is computed by dividing:

Accepted Answer

A) Net income by interest expense. 
B) Operating income by interest expense. 
C) Interest expense by net income. 
D) Interest expense by operating income. 
A) Net income by interest expense. 
B) Operating income by interest expense. 
C) Interest expense by net income. 
D) Interest expense by operating income.

Question 18

Assets that have been pledged as security for a loan:

Accepted Answer

A) Are reported as liabilities on the balance sheet. 
B) Must be sold when the loan matures. 
C) Become the property of the lender until the loan is paid in full. 
D) Are disclosed in the notes to the financial statements. 
A) Are reported as liabilities on the balance sheet. 
B) Must be sold when the loan matures. 
C) Become the property of the lender until the loan is paid in full. 
D) Are disclosed in the notes to the financial statements.

Question 19

Which of the following payroll taxes do not stop once an employee reaches a certain level of income:

Accepted Answer

A) Medicare taxes. 
B) Social security taxes. 
C) Unemployment taxes. 
D) Medicare,Social security,and unemployment taxes. 
A) Medicare taxes. 
B) Social security taxes. 
C) Unemployment taxes. 
D) Medicare,Social security,and unemployment taxes.

Question 20

The future value will always be less than the present value.

Accepted Answer

A) True 
 B)False

Exam 10: Liabilities

Current liabilities are obligations that must be repaid within the shorter of one year or the operating cycle.

A $1,000 bond that sells for 104 has a selling price of:

The account Discount on Bonds Payable actually represents interest expense and will be amortized over the life of the bond.

The account Discount on Bonds Payable has a debit balance and should appear on the balance sheet as an asset; the account Premium on Bonds Payable has a credit balance and should be classified as a liability.

The current portion of long-term debt should be reported:

The amortization of discount on bonds payable reduces the amount of interest expense recognized during the period.

When a corporation has a right to redeem bonds in advance of the maturity date,the bond is considered a:

Bonds payable are a means of dividing a very large,long-term liability among many creditors,some of whom may participate in the loan only for a short period of time.

Working capital is equal to current assets less current liabilities.

A discount on bonds payable is best described as:

The withholding of taxes from an employee's pay is a liability to the company.

Sinking funds make a bond issue less attractive to the investor.

If a business ceases operations and liquidates,which of the following will be paid last?

Payments of pensions and other benefits to retired workers are recognized as expense in the period payment is made.

The interest coverage ratio:

The interest coverage ratio is computed by dividing:

Assets that have been pledged as security for a loan:

Which of the following payroll taxes do not stop once an employee reaches a certain level of income:

The future value will always be less than the present value.

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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