Question 1

The amount withheld for FICA (Social Security)is first recorded as a liability on the employer's books.

Accepted Answer

A) True 
 B)False

Question 2

On January 1,2011,Alpha Enterprise signed a $100,000,6%,20-year mortgage note to buy a new warehouse.The mortgage will be repaid in a series of twenty equal annual installment payments.Over the 20-year period,as each installment payment is made,the portion of the payment that is interest expense will ________.

Accepted Answer

A) increase 
B) decrease 
C) stay the same 
D) The answer cannot be determined from the information given.

Question 3

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.These bonds sold at ________.

Accepted Answer

A) a premium 
B) a discount 
C) par 
D) The answer cannot be determined from the information given.

Question 4

Row,Inc.needed some long-term financing and arranged for a 10-year,$100,000,7% mortgage loan on January 1,2010.Annual payments of $14,238 will be made on December 31 each year.Interest expense for the year ended December 31,2012 will be ________ interest expense for 2011.

Accepted Answer

A) higher than 
B) the same as 
C) lower than 
D) The answer cannot be determined from the information given.

Question 5

On January 1,2011,Zenith,Inc.,signed a $200,000,5%,20-year mortgage note to buy a new office building.The mortgage will be repaid in a series of twenty equal annual installment payments.Over the 20-year period,as each installment payment is made,the amount that Zenith,Inc.,will show on its balance sheet for mortgage payable will ________.

Accepted Answer

A) increase 
B) decrease 
C) stay the same 
D) The answer cannot be determined from the information given.

Question 6

$100,000 of 9%,10-year bonds were issued for $106,710 when the market rate of interest was 8%.The bonds pay interest once a year.
1.How much interest will be paid in cash in the first year?
2.How much interest expense will be reported for the first year,assuming the company uses effective-interest amortization?
3.How much interest expense will be reported for the first year,assuming the company uses straight-line amortization?

Accepted Answer

The answer of $100,000 of 9%,10-year bonds were issued for...

Question 7

On July 1,2011,Ace Electronics issued $10 million dollars of 8%,20-year bonds at 102.The bonds pay interest semiannually on December 31 and June 30.How much cash will Ace pay on December 31,2011,the first interest payment date?

Accepted Answer

A) $800,000 
B) $408,000 
C) $400,000 
D) $816,000

Question 8

Brook's Bike Company sold 80 mountain bikes during May.The company offered a one-year warranty.Future warranty expense was estimated to be $25 per bike.During May,the company spent $115 on parts and labor to repair three bikes that were under warranty.The warranty expense for May was ________.

Accepted Answer

A) $115 
B) $345 
C) $2,000 
D) $2,115

Exam 7: Accounting for Liabilities

The amount withheld for FICA (Social Security)is first recorded as a liability on the employer's books.

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.These bonds sold at ________.

Row,Inc.needed some long-term financing and arranged for a 10-year,$100,000,7% mortgage loan on January 1,2010.Annual payments of $14,238 will be made on December 31 each year.Interest expense for the year ended December 31,2012 will be ________ interest expense for 2011.

On July 1,2011,Ace Electronics issued $10 million dollars of 8%,20-year bonds at 102.The bonds pay interest semiannually on December 31 and June 30.How much cash will Ace pay on December 31,2011,the first interest payment date?

Brook's Bike Company sold 80 mountain bikes during May.The company offered a one-year warranty.Future warranty expense was estimated to be $25 per bike.During May,the company spent $115 on parts and labor to repair three bikes that were under warranty.The warranty expense for May was ________.