Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A commitment,such as a contract to pay a baseball player $5,000,000 a year for five years,should be listed as a long-term liability.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Estimated liabilities,contingencies,and commitments are usually reported in the long-term liability section of the financial statements.

Accepted Answer

A) True 
 B)False

Question 5

A company issues $50 million of bonds at par on January 1,2018.The bonds pay 10% interest semi-annually on 12/31 and 6/30 and mature in 20 years.The journal entry when the bonds are sold is:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 6

Fully amortizing installment note payable (mortgage)
On October 31,2018,Seldon Company incurs a 30-year $600,000 mortgage liability in conjunction with the purchase of a motel.This mortgage is payable in equal monthly installments of $6,485,which include interest computed at an annual rate of 12%.The first monthly payment is made on November 30,2018.This mortgage is fully amortizing over 360 months.
Complete the amortization table for the first two payments by entering the correct dollar amounts in the blank spaces provided.In addition,answer the questions that follow.
   (a)With respect to this mortgage,Seldon's 2018 income statement includes interest expense of $________,and Seldon's balance sheet at December 31,2018 includes a total liability for this mortgage of $________.(Do not separate into current and long-term portions. )
(b)The aggregate monthly cash payments Seldon will make over the 30-year life of the mortgage amount to $________.
(c)Over the 30-year life of the mortgage,the amount Seldon will pay for interest amounts to $________.

Accepted Answer

@#IMG-DLM& 1 $600,000 × 0.12 × 1 ÷ 12 = 6,000 2.$6

Question 7

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 8

[The following information applies to the questions displayed below.]
On September 1,2018,Select Company borrowed $600,000 from a bank and signed a 12%,six-month note payable,with interest on the note due at maturity.
-The total amount of the current liability (including interest payable)for this loan that appears in Select Company's balance sheet at December 31,2018,is:

Accepted Answer

A) $600,000. 
B) $624,000. 
C) $636,000. 
D) $672,000. 
A) $600,000. 
B) $624,000. 
C) $636,000. 
D) $672,000.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Loss contingencies should be recorded in the accounting records whenever it is probable that a loss has been incurred and the amount of loss might be material in amount.

Accepted Answer

A) True 
 B)False

Question 11

Worker's compensation premiums are deducted from each employee's gross pay.

Accepted Answer

A) True 
 B)False

Question 12

Interest expense on this bond issue reported in Cricket's Year 1,income statement is:

Accepted Answer

A) $2,400,000. 
B) $4,800,000. 
C) $5,400,000. 
D) $7,200,000. 
A) $2,400,000. 
B) $4,800,000. 
C) $5,400,000. 
D) $7,200,000.

Question 13

Over the 15-year life of the mortgage,the total amount Bradley will pay for interest charges is:

Accepted Answer

A) $232,000. 
B) $360,000. 
C) $200,000. 
D) $432,060. 
A) $232,000. 
B) $360,000. 
C) $200,000. 
D) $432,060.

Question 14

The amount of bond interest expense recognized by Webster Company in 2019 with respect to these bonds is:

Accepted Answer

A) $60,000. 
B) $63,000. 
C) $120,000. 
D) $66,000. 
A) $60,000. 
B) $63,000. 
C) $120,000. 
D) $66,000.

Question 15

Bonds issued at par - basic concepts
On April 1,Year 1,Olsen Products,Inc.issued at par $25 million of 10%,10-year bonds payable.Interest is payable semiannually each April 1 and October 1.
(a)What is the amount of cash paid to bondholders for interest during Year 1?
$________
(b)Give the adjusting entry necessary at December 31,Year 1 (if any),regarding this bond issue.
(c)Interest expense on this bond issue reported in Olsen Products' Year 1 income statement is:
$________
(d)With respect to this bond issue,Olsen Products' balance sheet at December 31,Year 1,includes bonds payable of $________ and interest payable of $________ (indicate $0 or "none" if the item is not reported.
(e)Give the journal entry made by Olsen Products on April 1,Year 2,to record the semiannual payment of interest to bondholders.

Accepted Answer

(a)$1,250,000 (Oct.1 payment:

Question 16

What is the total cash (including interest)paid for the building purchased by Able?

Accepted Answer

A) $800,000 
B) $836,000 
C) $854,000 
D) $816,000 
A) $800,000 
B) $836,000 
C) $854,000 
D) $816,000

Question 17

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 18

Notes payable
On September 1,2018,Charles Associates borrowed $600,000 from Diana Credit Union and signed a 9% one-year note payable with all interest and principal due at maturity.

Accepted Answer

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

Question 19

When an installment note is structured as a "fully amortizing" loan with equal monthly payments (such as a traditional mortgage):

Accepted Answer

A) The portion of each payment allocated to interest expense is the same each month. 
B) The sum of the monthly payments is equal to the amount of the installment note (mortgage). 
C) The difference between the sum of all monthly payments and the principal amount of the note constitutes interest. 
D) The portion of each payment allocated to repayment of principal decreases each month as the mortgage is paid off. 
A) The portion of each payment allocated to interest expense is the same each month. 
B) The sum of the monthly payments is equal to the amount of the installment note (mortgage). 
C) The difference between the sum of all monthly payments and the principal amount of the note constitutes interest. 
D) The portion of each payment allocated to repayment of principal decreases each month as the mortgage is paid off.

Question 20

What is the approximate maximum additional amount Apex can borrow and not exceed a debt ratio of 0.3?

Accepted Answer

A) $4,000,000 
B) $5,500,000 
C) $5,000,000 
D) $600,000 
A) $4,000,000 
B) $5,500,000 
C) $5,000,000 
D) $600,000

Exam 10: Liabilities

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

A commitment,such as a contract to pay a baseball player $5,000,000 a year for five years,should be listed as a long-term liability.

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

Estimated liabilities,contingencies,and commitments are usually reported in the long-term liability section of the financial statements.

A company issues $50 million of bonds at par on January 1,2018.The bonds pay 10% interest semi-annually on 12/31 and 6/30 and mature in 20 years.The journal entry when the bonds are sold is:

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

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

Loss contingencies should be recorded in the accounting records whenever it is probable that a loss has been incurred and the amount of loss might be material in amount.

Worker's compensation premiums are deducted from each employee's gross pay.

Interest expense on this bond issue reported in Cricket's Year 1,income statement is:

Over the 15-year life of the mortgage,the total amount Bradley will pay for interest charges is:

The amount of bond interest expense recognized by Webster Company in 2019 with respect to these bonds is:

What is the total cash (including interest)paid for the building purchased by Able?

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

Notes payable On September 1,2018,Charles Associates borrowed $600,000 from Diana Credit Union and signed a 9% one-year note payable with all interest and principal due at maturity.

When an installment note is structured as a "fully amortizing" loan with equal monthly payments (such as a traditional mortgage):

What is the approximate maximum additional amount Apex can borrow and not exceed a debt ratio of 0.3?

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

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