Question 1

The entry to record a bond retirement at maturity usually involves:

Accepted Answer

A)  no gain or loss.
B)  a credit to Gain on Bond Retirement.
C)  a debit to Loss on Bond Retirement.
D)  a credit to Bonds Payable.E) B) and C)
F) None of the above

Question 2

A company purchased equipment by issuing a $200,000,one-year,8% note payable.The transaction would be recorded in the accounting records with a credit to

Accepted Answer

A)  Notes payable for $200,000.
B)  Notes payable for $216,000.
C)  Notes payable for $184,000.
D)  Notes payable for $208,000.E) All of the above
F) C) and D)

Question 3

A company typically records the amount owed to suppliers for goods or services when:

Accepted Answer

A)  they are ordered.
B)  a verbal commitment to buy has first been made.
C)  they are paid for.
D)  the goods or services are received.E) All of the above
F) None of the above

Question 4

Which of the following is not true regarding the quick ratio?

Accepted Answer

A)  If a company has more current assets than liquid assets,the current ratio will be larger than the quick ratio.
B)  A high quick ratio suggests a high ability to pay current liabilities.
C)  Liquid assets include cash and cash equivalents,short-term investments,and net accounts receivable.
D)  A quick ratio greater than 1 implies a company could not pay all of its current liabilities.E) A) and D)
F) A) and C)

Question 5

IBM is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,IBM will:

Accepted Answer

A)  not be able to issue the bonds because no one will buy them.
B)  receive a higher issue price as buyers compete for the bonds.
C)  have to accept a lower issue price to attract buyers.
D)  have to reprint the bond certificates to change stated interest rate to 5%.E) None of the above
F) A) and B)

Question 6

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as:

Accepted Answer

A)  a bond certificate.
B)  a loan covenant.
C)  a renegotiation.
D)  a contingent liability.E) C) and D)
F) All of the above

Question 7

A typical balance sheet provides no information regarding which of the following items?

Accepted Answer

A)  To whom the company owes money.
B)  For what the company owes money.
C)  How much the company owes.
D)  The proportion of the company's debts that will be paid in the short-term.E) B) and D)
F) All of the above

Question 8

Operating cycles are generally longer than a year.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements regarding payroll liabilities is true?

Accepted Answer

A)  Accrued payroll includes such liabilities as retirement and health benefits that are not yet paid.
B)  Only employees are required to pay FICA taxes.
C)  Both employers and employees are required to pay unemployment taxes.
D)  Accrued payroll liabilities do not include any voluntary deductions by employees for charitable contributions or union dues.E) All of the above
F) C) and D)

Question 10

Debentures are

Accepted Answer

A)  unsecured bonds.
B)  secured bonds.
C)  serial bonds.
D)  callable bonds.E) A) and D)
F) A) and C)

Question 11

A deferred tax liability:

Accepted Answer

A)  is only disclosed in the notes to the financial statements.
B)  is recorded in a contra-liability account.
C)  represents income tax amounts that are deferred to future years because of temporary differences between GAAP rules and IRS rules.
D)  is never a current liability.E) B) and C)
F) None of the above

Question 12

Use the information above to answer the following question.What is the total amount of interest expense that will be recorded over the life of these bonds?

Accepted Answer

A)  $300,000
B)  $285,000
C)  $315,000
D)  $330,000E) A) and C)
F) A) and B)

Question 13

A company issued 10-year,8% bonds with a face value of $200,000.Interest is paid annually.The market rate on the issue date was 7.5% and the company received $206,948 in cash proceeds.Which of the following statements is true?

Accepted Answer

A)  The company must pay $184,000 at maturity plus $16,000 in interest each year for 10 years.
B)  The company must pay $206,948 at maturity plus $15,000 in interest each year for 10 years.
C)  The company must pay $200,000 at maturity plus $16,000 in interest each year for 10 years.
D)  The company must pay $200,000 at maturity plus $15,000 in interest each year for 10 years.E) None of the above
F) A) and D)

Question 14

Brief Respite,Inc. ,sold underwear made from a fabric that gave many of its customers a serious rash.The customers are suing the company in a class action suit and Brief Respite's attorneys think it is probable that the case will cost the company $2 million,although the verdict is not yet in.The company should:

Accepted Answer

A)  not include this information in its annual report.
B)  record a liability and a gain for $2 million.
C)  only explain the situation in the notes to the financial statements.
D)  record a liability and a loss for $2 million.E) A) and B)
F) A) and C)

Question 15

A 4-month,$6,500,9% note payable incurs total interest of

Accepted Answer

A)  $585
B)  $292
C)  $146
D)  $195E) A) and B)
F) A) and C)

Question 16

All of the following may be used to calculate total liquid assets,except:

Accepted Answer

A)  inventory.
B)  cash equivalents.
C)  a 120-day Treasury bill.
D)  allowance for doubtful accounts.E) B) and D)
F) C) and D)

Question 17

A company pays $18,000 in interest on notes,consisting of $12,000 interest that accrued during the last accounting period and $6,000 of interest accumulated during this accounting period but not previously recorded on the books.The journal entry for the interest payment should:

Accepted Answer

A)  debit Interest Expense for $18,000 and credit Cash for $18,000.
B)  debit Cash for $18,000 and credit Interest Payable for $18,000.
C)  debit Interest Expense for $6,000,debit Interest Payable $12,000 and credit Cash for $18,000.
D)  debit Interest Payable for $12,000,debit Accrued Interest $6,000 and credit Cash for $18,000.E) A) and D)
F) C) and D)

Question 18

During the current year,a company issues $200,000 in long-term bonds and pays off $200,000 in accounts payable.Which of the following statements is true regarding the company's year-end ratios?

Accepted Answer

A)  Both the quick ratio and times interest earned ratio will rise.
B)  The quick ratio will fall but the times interest earned ratio will rise.
C)  The quick ratio will rise but the times interest earned ratio will fall.
D)  Both the quick ratio and times interest earned ratio will fall.E) B) and C)
F) All of the above

Question 19

Bonds that are backed with a pledge of the company's assets are called:

Accepted Answer

A)  debenture bonds.
B)  convertible bonds.
C)  secured bonds.
D)  registered bonds.E) None of the above
F) A) and B)

Question 20

On October 1,you borrow $200,000 in order to build a new facility.The loan is for 10 years,at 7% interest,and semiannual interest payments are due each April and October.The journal entry to record the issuance of the promissory note should:

Accepted Answer

A)  debit Notes Payable for $200,000,debit Interest Expense for $14,000,credit Cash for $200,000,and credit Interest Payable for $14,000.
B)  debit Accrued Interest for $14,000 and credit Cash for $14,000.
C)  debit Cash for $200,000 and credit Notes Payable for $200,000.
D)  debit Cash for $200,000,debit Interest Expense for $14,000,credit Notes Payable for $200,000,and credit Interest Payable $14,000.E) B) and C)
F) All of the above

Exam 10: Liabilities

Which of the following is not true regarding the quick ratio?

Correct Answer
verified

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as:

Correct Answer
verified

The entry to record a bond retirement at maturity usually involves:

Correct Answer
verified

A company typically records the amount owed to suppliers for goods or services when:

Correct Answer
verified

Which of the following statements regarding payroll liabilities is true?

Correct Answer
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Operating cycles are generally longer than a year.

Correct Answer
verified

A company pays $18,000 in interest on notes,consisting of $12,000 interest that accrued during the last accounting period and $6,000 of interest accumulated during this accounting period but not previously recorded on the books.The journal entry for the interest payment should:

Correct Answer
verified

During the current year,a company issues $200,000 in long-term bonds and pays off $200,000 in accounts payable.Which of the following statements is true regarding the company's year-end ratios?

Correct Answer
verified

A company issued 10-year,8% bonds with a face value of $200,000.Interest is paid annually.The market rate on the issue date was 7.5% and the company received $206,948 in cash proceeds.Which of the following statements is true?

Correct Answer
verified

A deferred tax liability:

Correct Answer
verified

IBM is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,IBM will:

Correct Answer
verified

All of the following may be used to calculate total liquid assets,except:

Correct Answer
verified

Bonds that are backed with a pledge of the company's assets are called:

Correct Answer
verified

A company purchased equipment by issuing a $200,000,one-year,8% note payable.The transaction would be recorded in the accounting records with a credit to

Correct Answer
verified

Use the information above to answer the following question.What is the total amount of interest expense that will be recorded over the life of these bonds?

Correct Answer
verified

Debentures are

Correct Answer
verified

Correct Answer
verified

On October 1,you borrow $200,000 in order to build a new facility.The loan is for 10 years,at 7% interest,and semiannual interest payments are due each April and October.The journal entry to record the issuance of the promissory note should:

Correct Answer
verified

A 4-month,$6,500,9% note payable incurs total interest of

Correct Answer
verified

A typical balance sheet provides no information regarding which of the following items?

Correct Answer
verified

Exam 10: Liabilities

Which of the following is not true regarding the quick ratio?

Correct AnswerverifiedShow Answer

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as:

Correct AnswerverifiedShow Answer

The entry to record a bond retirement at maturity usually involves:

Correct AnswerverifiedShow Answer

A company typically records the amount owed to suppliers for goods or services when:

Correct AnswerverifiedShow Answer

Which of the following statements regarding payroll liabilities is true?

Correct AnswerverifiedShow Answer

Operating cycles are generally longer than a year.

Correct AnswerverifiedShow Answer

A company pays $18,000 in interest on notes,consisting of $12,000 interest that accrued during the last accounting period and $6,000 of interest accumulated during this accounting period but not previously recorded on the books.The journal entry for the interest payment should:

Correct AnswerverifiedShow Answer

During the current year,a company issues $200,000 in long-term bonds and pays off $200,000 in accounts payable.Which of the following statements is true regarding the company's year-end ratios?

Correct AnswerverifiedShow Answer

A company issued 10-year,8% bonds with a face value of $200,000.Interest is paid annually.The market rate on the issue date was 7.5% and the company received $206,948 in cash proceeds.Which of the following statements is true?

Correct AnswerverifiedShow Answer

A deferred tax liability:

Correct AnswerverifiedShow Answer

IBM is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,IBM will:

Correct AnswerverifiedShow Answer

All of the following may be used to calculate total liquid assets,except:

Correct AnswerverifiedShow Answer

Bonds that are backed with a pledge of the company's assets are called:

Correct AnswerverifiedShow Answer

A company purchased equipment by issuing a $200,000,one-year,8% note payable.The transaction would be recorded in the accounting records with a credit to

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the total amount of interest expense that will be recorded over the life of these bonds?

Correct AnswerverifiedShow Answer

Debentures are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On October 1,you borrow $200,000 in order to build a new facility.The loan is for 10 years,at 7% interest,and semiannual interest payments are due each April and October.The journal entry to record the issuance of the promissory note should:

Correct AnswerverifiedShow Answer

A 4-month,$6,500,9% note payable incurs total interest of

Correct AnswerverifiedShow Answer

A typical balance sheet provides no information regarding which of the following items?

Correct AnswerverifiedShow Answer

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