Question 1

A company receives $95 for merchandise sold to a consumer,of which $5 is for sales tax.The $5 of sales tax:

Accepted Answer

A)  increases sales revenue.
B)  increases current liabilities.
C)  increases selling expenses.
D)  is not recorded.E) All of the above
F) B) and D)

Question 2

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,the company should:

Accepted Answer

A)  include a description in the notes to the financial statements.
B)  record the amount of the liability times the probability of its occurrence.
C)  record the amount of the liability as a long-term liability on the balance sheet.
D)  exclude the information about the contingent liability from its financial statements and footnotes.E) C) and D)
F) A) and B)

Question 3

Use the information above to answer the following question.What is the employer's payroll tax expense for the week?

Accepted Answer

A)  $113.00
B)  $119.20
C)  $174.20
D)  $235.40E) B) and C)
F) All of the above

Question 4

During one pay period,your company distributes $130,500 to employees as net pay.The income tax withholdings were $19,000 and the FICA withholdings were $5,000.The total wages and payroll tax expense to the company for this pay period,excluding any unemployment taxes,was:

Accepted Answer

A)  $149,500.
B)  $130,500.
C)  $154,500.
D)  $159,500.E) B) and C)
F) A) and D)

Question 5

A negative times interest earned ratio suggests that the company:

Accepted Answer

A)  is using resources very efficiently.
B)  has a serious financial problem.
C)  has a very high interest expense.
D)  has a high level of sales revenue.E) A) and D)
F) None of the above

Question 6

A discount on bonds payable is reported in the financial statements as:

Accepted Answer

A)  a reduction from the bond liability on the balance sheet.
B)  an expense on the income statement.
C)  an asset on the balance sheet.
D)  revenue on the income statement.E) A) and D)
F) None of the above

Question 7

FICA payments consist of Social Security taxes and Medicare taxes.

Accepted Answer

A) True 
 B)False

Question 8

Use the information above to answer the following question.A company pays $9,000 in interest on notes consisting of $6,000 of interest that was accrued during the last accounting period and $3,000 of interest that accumulated during this accounting period that has not yet been accrued on the books.The journal entry for the interest payment should:

Accepted Answer

A)  debit Interest Expense $9,000 and credit Cash $9,000.
B)  debit Cash $9,000 and credit Interest Payable $9,000.
C)  debit Interest Expense $3,000,debit Interest Payable $6,000,and credit Cash $9,000.
D)  debit Interest Payable $6,000,debit Accrued Interest $3,000,and credit Cash $9,000.E) B) and C)
F) A) and D)

Question 9

Which of the following is true regarding the account entitled Premium on Bonds Payable?

Accepted Answer

A)  It is an account that increases when amortization entries are made.
B)  It is an account that appears on the balance sheet of the issuer as a deduction from bonds payable.
C)  It is an account that decreases when amortization entries are made and its balance is equal to zero at the maturity date of the bond.
D)  It is a contra account with a normal debit balance.E) A) and D)
F) B) and D)

Question 10

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 rise in the economy so that similar financial investments pay 9%,IBM will:

Accepted Answer

A)  not be able to issue the bonds because no one will buy them.
B)  receive a higher issue price to compensate buyers for the lower stated interest rate.
C)  have to accept a lower issue price to attract buyers.
D)  have to reprint the bond certificates to change the stated interest rate to 9%.E) None of the above
F) All of the above

Question 11

Use the information above to answer the following question.What is the entry to record the payment at the maturity date of the note?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) A) and D)
F) A) and C)

Question 12

Which of the following is not true for a 10-year bond issued at a discount?

Accepted Answer

A)  At the end of ten years,the balance in the Discount on Bonds Payable account will equal 0.
B)  At the end of ten years,the carrying value will equal the face value.
C)  At the end of ten years,the total interest expense will reflect the market rate of interest.
D)  At the end of ten years,the total interest expense will equal the total interest paid.E) All of the above
F) B) and D)

Question 13

Use the information above to answer the following question.How would this information be reported on the balance sheet at the end of the first quarter?

Accepted Answer

A)  $400 as interest expense and $20,000 under long-term debt.
B)  $400 as interest payable,$5,000 as current portion of long-term debt under current liabilities,and $15,000 under long-term debt.
C)  $1,600 of interest under current liabilities,$5,000 as current portion of long-term debt under current liabilities and $15,000 under long-term debt.
D)  $400 as interest payable under current liabilities and $20,000 under long-term debt.E) B) and D)
F) A) and B)

Question 14

Bonds that are backed by a company's assets are called secured bonds.

Accepted Answer

A) True 
 B)False

Question 15

Using straight-line amortization,when a bond is sold at a discount:

Accepted Answer

A)  bonds payable declines by a constant amount each year.
B)  interest expense declines by a constant amount each year.
C)  bonds payable,net of discount,declines by a constant amount each year.
D)  interest expense is a constant amount each year.E) C) and D)
F) A) and B)

Question 16

Bonds allow a company to borrow large sums of money from many different investors.

Accepted Answer

A) True 
 B)False

Question 17

Current liabilities could include all of the following except:

Accepted Answer

A)  accounts payable due in 30 days.
B)  notes payable due in 9 months.
C)  a bank loan due in 18 months.
D)  any part of long-term debt due during the current period.E) A) and B)
F) A) and C)

Question 18

Interest on an obligation is recorded

Accepted Answer

A)  as time passes.
B)  when goods are purchased on account.
C)  at maturity.
D)  when a bank loan is obtained.E) None of the above
F) All of the above

Question 19

A contingent liability:

Accepted Answer

A)  is always a specific amount.
B)  is an obligation arising from the purchase of goods or services on credit.
C)  is an obligation not requiring a future payment.
D)  is a potential obligation that depends on a future event.E) A) and D)
F) A) and C)

Question 20

Part I
FWP Co.issued $100,000,10-year bonds on January 1,2013.The stated rate of interest on the bonds is 10% payable annually on 12/31.Provide the requested information for the bonds immediately after issuance (January 1,2013)under each of the three independent scenarios described below:  Part II
On January 1,2014,FWP sells $2 million of 8% bonds at face value with interest to be paid at the end of each year.Prepare the journal entries on the following dates:
a)January 1,2014 (the initial bond sale).
b)March 31,2014 (the end of the first quarter).
c)December 31,2014 (the payment of interest at the end of the year;assume that the interest owed for each of the first three quarters has been properly accrued).

Accepted Answer

The answer of Part I
FWP Co.issued $100,000,10-year bonds on January...

Exam 10: Liabilities

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,the company should:

Correct Answer
verified

A company receives $95 for merchandise sold to a consumer,of which $5 is for sales tax.The $5 of sales tax:

Correct Answer
verified

Correct Answer
verified

Use the information above to answer the following question.How would this information be reported on the balance sheet at the end of the first quarter?

Correct Answer
verified

Use the information above to answer the following question.What is the employer's payroll tax expense for the week?

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 rise in the economy so that similar financial investments pay 9%,IBM will:

Correct Answer
verified

Bonds allow a company to borrow large sums of money from many different investors.

Correct Answer
verified

Use the information above to answer the following question.What is the entry to record the payment at the maturity date of the note?

Correct Answer
verified

Current liabilities could include all of the following except:

Correct Answer
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Which of the following is true regarding the account entitled Premium on Bonds Payable?

Correct Answer
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A contingent liability:

Correct Answer
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FICA payments consist of Social Security taxes and Medicare taxes.

Correct Answer
verified

Interest on an obligation is recorded

Correct Answer
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A discount on bonds payable is reported in the financial statements as:

Correct Answer
verified

Bonds that are backed by a company's assets are called secured bonds.

Correct Answer
verified

A negative times interest earned ratio suggests that the company:

Correct Answer
verified

During one pay period,your company distributes $130,500 to employees as net pay.The income tax withholdings were $19,000 and the FICA withholdings were $5,000.The total wages and payroll tax expense to the company for this pay period,excluding any unemployment taxes,was:

Correct Answer
verified

Using straight-line amortization,when a bond is sold at a discount:

Correct Answer
verified

Which of the following is not true for a 10-year bond issued at a discount?

Correct Answer
verified

Correct Answer
verified

Exam 10: Liabilities

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,the company should:

Correct AnswerverifiedShow Answer

A company receives $95 for merchandise sold to a consumer,of which $5 is for sales tax.The $5 of sales tax:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.How would this information be reported on the balance sheet at the end of the first quarter?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the employer's payroll tax expense for the week?

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 rise in the economy so that similar financial investments pay 9%,IBM will:

Correct AnswerverifiedShow Answer

Bonds allow a company to borrow large sums of money from many different investors.

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the entry to record the payment at the maturity date of the note?

Correct AnswerverifiedShow Answer

Current liabilities could include all of the following except:

Correct AnswerverifiedShow Answer

Which of the following is true regarding the account entitled Premium on Bonds Payable?

Correct AnswerverifiedShow Answer

A contingent liability:

Correct AnswerverifiedShow Answer

FICA payments consist of Social Security taxes and Medicare taxes.

Correct AnswerverifiedShow Answer

Interest on an obligation is recorded

Correct AnswerverifiedShow Answer

A discount on bonds payable is reported in the financial statements as:

Correct AnswerverifiedShow Answer

Bonds that are backed by a company's assets are called secured bonds.

Correct AnswerverifiedShow Answer

A negative times interest earned ratio suggests that the company:

Correct AnswerverifiedShow Answer

During one pay period,your company distributes $130,500 to employees as net pay.The income tax withholdings were $19,000 and the FICA withholdings were $5,000.The total wages and payroll tax expense to the company for this pay period,excluding any unemployment taxes,was:

Correct AnswerverifiedShow Answer

Using straight-line amortization,when a bond is sold at a discount:

Correct AnswerverifiedShow Answer

Which of the following is not true for a 10-year bond issued at a discount?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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