Question 1

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 2

[The following information applies to the questions displayed below.]
The average employee of Girard Corporation earns gross pay of $75,000 per year.The following table shows the relative size of various payroll amounts by expressing each as a percentage of total wages and salaries expense (gross pay):
   In addition,Girard pays $425 per month per employee for group health insurance.
-Which of the following represents the second largest payroll related expense incurred by Girard?

Accepted Answer

A) Group health insurance premiums. 
B) Income taxes expense. 
C) The employer's share of social security taxes and Medicare taxes. 
D) Wages and salaries expense. 
A) Group health insurance premiums. 
B) Income taxes expense. 
C) The employer's share of social security taxes and Medicare taxes. 
D) Wages and salaries expense.

Question 3

On April 1,Year 1,the journal entry to record issuance of the bonds will include:

Accepted Answer

A) A credit to Interest Payable of $1,000,000. 
B) A debit to Cash of $20,000,000. 
C) A credit to Bonds Payable of $2,100,000. 
D) A debit to Cash of $21,000,000. 
A) A credit to Interest Payable of $1,000,000. 
B) A debit to Cash of $20,000,000. 
C) A credit to Bonds Payable of $2,100,000. 
D) A debit to Cash of $21,000,000.

Question 4

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 5

Loss contingencies
Ocean to Coast Airlines could,at any time,incur a large loss if one of its airplanes were to crash.Is this an example of a loss contingency that should be disclosed in the company's financial statements? Explain.

Accepted Answer

The risk of a future airplane crash is n

Question 6

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 that 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 that the bondholders may be called upon to make good.

Question 7

A loss contingency is recorded in the accounting records when it is probable that a loss has been incurred and the amount of the loss is known.

Accepted Answer

A) True 
 B)False

Question 8

Deferred income taxes may be classified as assets.

Accepted Answer

A) True 
 B)False

Question 9

Junk bonds are attractive to investors because they carry a high rate of interest and are convertible into a specified number of shares of capital stock.

Accepted Answer

A) True 
 B)False

Question 10

[The following information applies to the questions displayed below.]
The average employee of Girard Corporation earns gross pay of $75,000 per year.The following table shows the relative size of various payroll amounts by expressing each as a percentage of total wages and salaries expense (gross pay):
   In addition,Girard pays $425 per month per employee for group health insurance.
-Which of the following represents the largest amount withheld from employees' paychecks?

Accepted Answer

A) Workers' compensation insurance. 
B) Social Security and Medicare. 
C) Personal income taxes. 
D) Group health insurance. 
A) Workers' compensation insurance. 
B) Social Security and Medicare. 
C) Personal income taxes. 
D) Group health insurance.

Question 11

The carrying value of this liability in Trego Company's December 31,2019,balance sheet is:

Accepted Answer

A) $1,000,000. 
B) $1,016,000. 
C) $1,020,000. 
D) $1,024,000. 
A) $1,000,000. 
B) $1,016,000. 
C) $1,020,000. 
D) $1,024,000.

Question 12

If a lease transfers ownership of the property to the lessee at the end of the lease term,it should be regarded as an operating lease.

Accepted Answer

A) True 
 B)False

Question 13

One advantage of issuing bonds instead of stock is that:

Accepted Answer

A) Interest is tax deductible,whereas dividends are not. 
B) Bonds have a longer maturity date. 
C) Interest rates are lower than dividend rates. 
D) The issuance of bonds does not affect earnings per share. 
A) Interest is tax deductible,whereas dividends are not. 
B) Bonds have a longer maturity date. 
C) Interest rates are lower than dividend rates. 
D) The issuance of bonds does not affect earnings per share.

Question 14

[The following information applies to the questions displayed below.]
The average employee of Girard Corporation earns gross pay of $75,000 per year.The following table shows the relative size of various payroll amounts by expressing each as a percentage of total wages and salaries expense (gross pay):
   In addition,Girard pays $425 per month per employee for group health insurance.
-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 15

[The following information applies to the questions displayed below.]
Trego Company issued,on December 31,2018,$1,000,000 face value,4%,5-year bonds.Interest will be paid semiannually each June 30 and December 31.The bonds sold at a price of 102;Trego uses the straight-line method of amortizing bond discount or premium.
-The entry made by Trego Company to record issuance of the bonds payable at December 31,2018,includes:

Accepted Answer

A) A debit to Cash of $1,000,000. 
B) A credit to Premium on Bonds Payable of $20,000. 
C) A credit to Bonds Payable of $1,020,000. 
D) A credit to Bond Interest Payable of $20,000. 
A) A debit to Cash of $1,000,000. 
B) A credit to Premium on Bonds Payable of $20,000. 
C) A credit to Bonds Payable of $1,020,000. 
D) A credit to Bond Interest Payable of $20,000.

Question 16

Working capital is equal to current assets less current liabilities.

Accepted Answer

A) True 
 B)False

Question 17

The amortization of a bond discount:

Accepted Answer

A) Decreases the carrying value of a bond and increases interest expense. 
B) Decreases the carrying value of a bond and decreases interest expense. 
C) Increases the carrying value of a bond and increases interest expense. 
D) Increases the carrying value of a bond and decreases interest expense. 
A) Decreases the carrying value of a bond and increases interest expense. 
B) Decreases the carrying value of a bond and decreases interest expense. 
C) Increases the carrying value of a bond and increases interest expense. 
D) Increases the carrying value of a bond and decreases interest expense.

Question 18

The amount of the present value of a future cash receipt will depend upon:

Accepted Answer

A) Only the length of time until the money is received. 
B) Only the amount of money to be received. 
C) Only the required rate of return. 
D) The amount of money to be received,the length of time until the money is received,and the required rate of return. 
A) Only the length of time until the money is received. 
B) Only the amount of money to be received. 
C) Only the required rate of return. 
D) The amount of money to be received,the length of time until the money is received,and the required rate of return.

Question 19

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 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

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

On April 1,Year 1,the journal entry to record issuance of the bonds will include:

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

Loss contingencies Ocean to Coast Airlines could,at any time,incur a large loss if one of its airplanes were to crash.Is this an example of a loss contingency that should be disclosed in the company's financial statements? Explain.

A discount on bonds payable is best described as:

A loss contingency is recorded in the accounting records when it is probable that a loss has been incurred and the amount of the loss is known.

Deferred income taxes may be classified as assets.

Junk bonds are attractive to investors because they carry a high rate of interest and are convertible into a specified number of shares of capital stock.

The carrying value of this liability in Trego Company's December 31,2019,balance sheet is:

If a lease transfers ownership of the property to the lessee at the end of the lease term,it should be regarded as an operating lease.

One advantage of issuing bonds instead of stock is that:

Working capital is equal to current assets less current liabilities.

The amortization of a bond discount:

The amount of the present value of a future cash receipt will depend upon:

A call provision on a bond:

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

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

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Rewarding Business Performance

Capital Budgeting

the Time Value of Money: Future Amounts and Present Values

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