Question 1

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 2

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

Accepted Answer

A) $642.800. 
B) $760,000. 
C) $681,200. 
D) $658,800. 
A) $642.800. 
B) $760,000. 
C) $681,200. 
D) $658,800.

Question 3

Webster 's entry at June 30,2019,to record the first semiannual payment of interest and amortization of discount on the bonds includes a:

Accepted Answer

A) Debit to Bond Interest Expense of $30,000. 
B) Credit to Cash of $33,000. 
C) Debit to Discount on Bonds Payable of $3,000. 
D) Debit to Bond Interest Expense of $33,000. 
A) Debit to Bond Interest Expense of $30,000. 
B) Credit to Cash of $33,000. 
C) Debit to Discount on Bonds Payable of $3,000. 
D) Debit to Bond Interest Expense of $33,000.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

On February 28,2018,$5,000,000 of 6%,10-year bonds payable,dated December 31,2017,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 30,2018,is $300,000. 
C) The amount of cash paid to bondholders on the next interest date,June 30,2018,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 30,2018,is $300,000. 
C) The amount of cash paid to bondholders on the next interest date,June 30,2018,is $50,000. 
D) The bonds were issued at a discount.

Question 6

In estimating annual pension expense,which of the following factors would not be taken into consideration?

Accepted Answer

A) Current financial condition of the company. 
B) Expected rate of return to be earned on pension fund assets. 
C) Employee turnover rates. 
D) Compensation levels and estimated rate of pay increases. 
A) Current financial condition of the company. 
B) Expected rate of return to be earned on pension fund assets. 
C) Employee turnover rates. 
D) Compensation levels and estimated rate of pay increases.

Question 7

Operating and capital leases
Berkeley Corporation wants to expand operations and is considering various leasing arrangements for additional equipment.Berkeley's management has heard the terms capital lease and operating lease mentioned by the accounting department and wants clarification of these terms before signing any lease contracts.
(a)Briefly explain the difference between a capital lease and an operating lease from a lessee's (Berkeley's)point of view.Your answer should include the financial statement impact of each type of lease.
(b)How does a lessee determine whether a specific lease contract is an operating lease or a capital lease? Include at least two of the criteria specified by the FASB in your answer.
(c)Which of the above two types of leases is sometimes referred to as "off-balance-sheet financing?" Briefly explain.

Accepted Answer

(a)A capital lease transfers most of the

Question 8

Bonds issued at discount or premium
On March 31,2018 Louis Company issued $20,000,000 face amount of 7%,5-year bonds payable,with interest payable each June 30 and December 31.The company received cash of $20,200,000,including the accrued interest from December 31,2017.Louis uses the straight-line method of amortizing any discount or premium over the remaining life of the bonds - 57 months.
(a)What was the amount of accrued interest received by Louis on March 31,2018 when the bonds were issued? (Do not assume the bonds were issued at par. )
$________
(b)What was the amount of discount or premium on the bonds at issuance date?
(Indicate discount or premium. )
$________
(c)What amount of cash is paid to bondholders for interest during year 2018?
$________
(d)What is Louis ' total interest expense for year 2018 related to this bond issue?
$________
(e)What is the carrying value of this bond issue as of December 31,2018?
$________

Accepted Answer

(a)Accrued interest: $20,000,000 × 7% ×

Question 9

Commitments,such as contracts for future transactions:

Accepted Answer

A) Are classified as liabilities. 
B) Are classified as assets. 
C) Are footnoted in financial statements,if material. 
D) Are only disclosed if negative due to the principle of conservatism. 
A) Are classified as liabilities. 
B) Are classified as assets. 
C) Are footnoted in financial statements,if material. 
D) Are only disclosed if negative due to the principle of conservatism.

Question 10

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 11

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 12

[The following information applies to the questions displayed below.]
Austin Corporation issues $6,000,000 of 10%,10-year bonds,dated December 31,Year 1.The bonds are issued on April 30,Year 2,at 100 plus accrued interest.Interest on the bonds is payable semiannually each June 30 and December 31.
-The entry to record the issuance of bonds payable on April 30,Year 2,includes:

Accepted Answer

A) A credit to Premium on Bonds Payable of $200,000. 
B) A debit to Cash of $150,000. 
C) A debit to Bond Interest Expense of $200,000. 
D) A credit to Bond Interest Payable of $200,000. 
A) A credit to Premium on Bonds Payable of $200,000. 
B) A debit to Cash of $150,000. 
C) A debit to Bond Interest Expense of $200,000. 
D) A credit to Bond Interest Payable of $200,000.

Question 13

There is a tax advantage for a company to issue bonds in lieu of stocks.

Accepted Answer

A) True 
 B)False

Question 14

All of the following are examples of current liabilities except:

Accepted Answer

A) Accounts payable. 
B) Pledged assets. 
C) Unearned revenue. 
D) Income taxes payable. 
A) Accounts payable. 
B) Pledged assets. 
C) Unearned revenue. 
D) Income taxes payable.

Question 15

The Social Security tax paid by an employer is:

Accepted Answer

A) Greater than the amount paid by the employee. 
B) Less than the amount paid by the employee. 
C) Equal to the amount paid by the employee. 
D) The employer does not pay Social Security tax,only the employee pays the tax. 
A) Greater than the amount paid by the employee. 
B) Less than the amount paid by the employee. 
C) Equal to the amount paid by the employee. 
D) The employer does not pay Social Security tax,only the employee pays the tax.

Question 16

Suppose investors decided to sell their holdings of capital stock in order to purchase outstanding bonds payable and as a result,the prices of bonds payable increased.What would be the likely impact on market interest rates?

Accepted Answer

A) Market interest rates will be unaffected. 
B) Market interest rates will increase. 
C) Market interest rates will fall. 
D) Although interest rates will change,it is impossible to predict the direction of change. 
A) Market interest rates will be unaffected. 
B) Market interest rates will increase. 
C) Market interest rates will fall. 
D) Although interest rates will change,it is impossible to predict the direction of change.

Question 17

A measure of a company's liquidity is:

Accepted Answer

A) Total assets divided by total equity. 
B) The current ratio. 
C) The dollar amount of liabilities that bear interest. 
D) The dollar amount of assets used as collateral for a loan. 
A) Total assets divided by total equity. 
B) The current ratio. 
C) The dollar amount of liabilities that bear interest. 
D) The dollar amount of assets used as collateral for a loan.

Question 18

Bonds payable-issued between interest dates
Barney Corporation received authorization on December 31,Year 1,to issue $2,500,000 of 6%,10-year bonds.The interest payment dates are June 30 and December 31.All the bonds were issued at a price of 100,plus accrued interest,on February 28,Year 2,two months after the authorization of the bond issue.   (d)Prepare the journal entry at February 28,Year 2,to record the issuance of the bonds.
(e)Prepare the journal entry at June 30,Year 2 to record the first semiannual interest payment on the bonds.

Accepted Answer

(a)$2,525,000
(b)$75

Question 19

[The following information applies to the questions displayed below.]
Austin Corporation issues $6,000,000 of 10%,10-year bonds,dated December 31,Year 1.The bonds are issued on April 30,Year 2,at 100 plus accrued interest.Interest on the bonds is payable semiannually each June 30 and December 31.
-The journal entry made by Austin Corporation to record the first semiannual interest payment on the bonds includes:

Accepted Answer

A) A debit to Bond Interest Expense of $300,000. 
B) A debit to Bond Interest Payable of $100,000. 
C) A debit to Bond Interest Expense of $100,000. 
D) A debit to Bond interest Expense of $200,000. 
A) A debit to Bond Interest Expense of $300,000. 
B) A debit to Bond Interest Payable of $100,000. 
C) A debit to Bond Interest Expense of $100,000. 
D) A debit to Bond interest Expense of $200,000.

Question 20

Which of the following is an example of a loss contingency that should be disclosed in a footnote to a company's financial statements?

Accepted Answer

A) The president of the company has threatened to resign if the board of directors does not vote to increase executive salaries. 
B) A lawsuit has been brought against the company,but the company hopes to prevail in the suit and thereby avoid any liability. 
C) The allowance for uncollectible accounts receivable is estimated at $200,000. 
D) The company owns special-purpose machinery that,if sold,would probably bring a price less than its current book value. 
A) The president of the company has threatened to resign if the board of directors does not vote to increase executive salaries. 
B) A lawsuit has been brought against the company,but the company hopes to prevail in the suit and thereby avoid any liability. 
C) The allowance for uncollectible accounts receivable is estimated at $200,000. 
D) The company owns special-purpose machinery that,if sold,would probably bring a price less than its current book value.

Exam 10: Liabilities

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.

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

Webster 's entry at June 30,2019,to record the first semiannual payment of interest and amortization of discount on the bonds includes a:

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

In estimating annual pension expense,which of the following factors would not be taken into consideration?

Commitments,such as contracts for future transactions:

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

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

There is a tax advantage for a company to issue bonds in lieu of stocks.

All of the following are examples of current liabilities except:

The Social Security tax paid by an employer is:

Suppose investors decided to sell their holdings of capital stock in order to purchase outstanding bonds payable and as a result,the prices of bonds payable increased.What would be the likely impact on market interest rates?

A measure of a company's liquidity is:

Which of the following is an example of a loss contingency that should be disclosed in a footnote to a company's financial statements?

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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