Question 1

Publicly issued debt certificates are also known as bonds.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 2

The times interest earned ratio shows the amount of interest earned for each dollar of interest expense.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 3

On January 1,which of the following journal entries will be made by Backyard to record the proceeds and issue of the note?

Accepted Answer

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

Question 4

Operating cycles are generally longer than a year.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not used to calculate the times interest earned ratio?

Accepted Answer

A)  Net income.
B)  Income tax expense.
C)  Interest earned on investments.
D)  Interest expense.E) B) and C)
F) A) and D)

Question 6

Discount on bonds is a contra liability account.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 7

A company issued $400,000,10-year,10 percent bonds at 104.What is the total amount of interest expense that will be recorded over the life of these bonds?

Accepted Answer

A)  $416,000
B)  $400,000
C)  $384,000
D)  $360,000E) A) and B)
F) B) and C)

Question 8

Match the term and the definition.Not all definitions will be used.
_____ Accrued liability
_____ Capital lease
_____ Face value
_____ Loan covenant
_____ Yield
_____ Private placement
_____ Line of credit
_____ Public debt offering
_____ Issue price
A.The present value of the lease payments for this type of lease is recorded as a liability.
B.Bond features that allow the issuer to repay the loan early under certain conditions.
C.These are liabilities that are overdue for payment.
D.A prearranged agreement that allows a company to borrow at will up to a limit.
E.When a company first finds a potential creditor and then negotiates a loan.
F.The value of this type of lease is recorded as a contra-asset account.
G.Also known as the market interest rate.
H.The amount that the lender actually pays for a bond.
I.The cost of issuing a bond.
J.Bond features that,if violated,allow the lender to demand repayment.
K.Also known as the stated interest rate on a bond.
L.The total amount of money that a company owes in debt.
M.The amount a company must repay creditors when a bond matures.
N.This type of lease goes unrecorded on the balance sheet.
O.The current market value of a bond if the current holder sells it to a third party.
P.These are liabilities that have been incurred during the period but not yet paid.
Q.When a company borrows money by issuing bonds in the financial markets.

Accepted Answer

P,A,M,J,G,E,D,Q,H

Question 9

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Using the effective interest method of amortization,the interest expense in the first year ended December 31 would be:

Accepted Answer

A)  $700.00
B)  $543.30.
C)  $667.00
D)  $758.80.E) C) and D)
F) B) and C) B

Question 10

Which one of the following can have a non-zero balance on a post-closing trial balance?

Accepted Answer

A)  Dividends declared
B)  Premium on bonds payable
C)  Income tax expense
D)  None of the above.E) B) and D)
F) A) and D)

Question 11

When the amount of a contingent liability can be estimated and its likelihood is possible but not probable,the company should:

Accepted Answer

A)  include a description in the footnotes to the financial statements.
B)  record the amount of the liability times the probability of its occurrence.
C)  record the liability and estimated amount of the loss on the balance sheet.
D)  omit the information about the contingent liability from its financial statements and footnotes.E) A) and D)
F) A) and B)

Question 12

Some bonds allow the issuing entity to repay the loan ahead of maturity.Such bonds are called:

Accepted Answer

A)  Convertible bonds.
B)  Collateral bonds.
C)  Callable Bonds.
D)  Senior bonds.E) All of the above
F) C) and D)

Question 13

Unearned revenue is recorded as an asset until the revenue has been earned.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 14

Current liabilities are due:

Accepted Answer

A)  but not receivable for more than the current operating cycle or more than one year,whichever is longer.
B)  but not payable for more than the current operating cycle or one year,whichever is longer.
C)  and receivable within the current operating cycle or one year,whichever is longer.
D)  and payable within the current operating cycle or one year,whichever is longer.E) A) and B)
F) C) and D)

Question 15

When the amount of a contingent liability cannot be estimated and its possible but not probable,the company should:

Accepted Answer

A)  include a description in the footnotes to the financial statements.
B)  record the amount of the liability times the probability of its occurrence.
C)  record the liability and estimated amount of the loss on the balance sheet.
D)  omit the information about the contingent liability from its financial statements and footnotes.E) None of the above
F) A) and D)

Question 16

On maturity,the carrying value of a bond will be equal to the face value.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 17

Accrued liabilities can include all of the following except:

Accepted Answer

A)  salaries payable.
B)  current portion of long-term debt.
C)  income tax payable.
D)  interest payable.E) A) and B)
F) All of the above

Question 18

Times interest earned ratio of less than 1 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) All of the above
F) B) and C)

Question 19

A company sells $200,000 in long-term bonds and buys $200,000 in inventory for cash.Which of the following statements is true?

Accepted Answer

A)  The quick ratio will stay the same and the times interest earned ratio will rise.
B)  The quick ratio will rise and the times interest earned ratio will rise.
C)  The quick ratio will rise but the times interest earned ratio will fall.
D)  The quick ratio will rise and the times interest earned ratio will stay the same.E) None of the above
F) C) and D)

Question 20

On October 1,2009,you borrow $200,000 at 6% interest and record the promissory note.In April and again in October of the following year,you are required to pay half the annual interest to your creditors.On December 31,2009,your journal entry for the quarter should:

Accepted Answer

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

Exam 10: Liabilities

Publicly issued debt certificates are also known as bonds. BT: Knowledge

Correct Answer
verified

The times interest earned ratio shows the amount of interest earned for each dollar of interest expense. BT: Comprehension

Correct Answer
verified

On January 1,which of the following journal entries will be made by Backyard to record the proceeds and issue of the note?

Correct Answer
verified
B

Operating cycles are generally longer than a year. BT: Knowledge

Correct Answer
verified

Which of the following is not used to calculate the times interest earned ratio?

Correct Answer
verified

Discount on bonds is a contra liability account. BT: Knowledge

Correct Answer
verified

A company issued $400,000,10-year,10 percent bonds at 104.What is the total amount of interest expense that will be recorded over the life of these bonds?

Correct Answer
verified

Correct Answer
verified
P,A,M,J,G,E,D,Q,H

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Using the effective interest method of amortization,the interest expense in the first year ended December 31 would be:

Correct Answer
verified
B

Which one of the following can have a non-zero balance on a post-closing trial balance?

Correct Answer
verified

When the amount of a contingent liability can be estimated and its likelihood is possible but not probable,the company should:

Correct Answer
verified

Some bonds allow the issuing entity to repay the loan ahead of maturity.Such bonds are called:

Correct Answer
verified

Unearned revenue is recorded as an asset until the revenue has been earned. BT: Comprehension

Correct Answer
verified

Current liabilities are due:

Correct Answer
verified

When the amount of a contingent liability cannot be estimated and its possible but not probable,the company should:

Correct Answer
verified

On maturity,the carrying value of a bond will be equal to the face value. BT: Comprehension

Correct Answer
verified

Accrued liabilities can include all of the following except:

Correct Answer
verified

Times interest earned ratio of less than 1 suggests that the company:

Correct Answer
verified

A company sells $200,000 in long-term bonds and buys $200,000 in inventory for cash.Which of the following statements is true?

Correct Answer
verified

On October 1,2009,you borrow $200,000 at 6% interest and record the promissory note.In April and again in October of the following year,you are required to pay half the annual interest to your creditors.On December 31,2009,your journal entry for the quarter should:

Correct Answer
verified

Exam 10: Liabilities

Publicly issued debt certificates are also known as bonds. BT: Knowledge

Correct AnswerverifiedShow Answer

The times interest earned ratio shows the amount of interest earned for each dollar of interest expense. BT: Comprehension

Correct AnswerverifiedShow Answer

On January 1,which of the following journal entries will be made by Backyard to record the proceeds and issue of the note?

Correct AnswerverifiedB

Operating cycles are generally longer than a year. BT: Knowledge

Correct AnswerverifiedShow Answer

Which of the following is not used to calculate the times interest earned ratio?

Correct AnswerverifiedShow Answer

Discount on bonds is a contra liability account. BT: Knowledge

Correct AnswerverifiedShow Answer

A company issued $400,000,10-year,10 percent bonds at 104.What is the total amount of interest expense that will be recorded over the life of these bonds?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedP,A,M,J,G,E,D,Q,H

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Using the effective interest method of amortization,the interest expense in the first year ended December 31 would be:

Correct AnswerverifiedB

Which one of the following can have a non-zero balance on a post-closing trial balance?

Correct AnswerverifiedShow Answer

When the amount of a contingent liability can be estimated and its likelihood is possible but not probable,the company should:

Correct AnswerverifiedShow Answer

Some bonds allow the issuing entity to repay the loan ahead of maturity.Such bonds are called:

Correct AnswerverifiedShow Answer

Unearned revenue is recorded as an asset until the revenue has been earned. BT: Comprehension

Correct AnswerverifiedShow Answer

Current liabilities are due:

Correct AnswerverifiedShow Answer

When the amount of a contingent liability cannot be estimated and its possible but not probable,the company should:

Correct AnswerverifiedShow Answer

On maturity,the carrying value of a bond will be equal to the face value. BT: Comprehension

Correct AnswerverifiedShow Answer

Accrued liabilities can include all of the following except:

Correct AnswerverifiedShow Answer

Times interest earned ratio of less than 1 suggests that the company:

Correct AnswerverifiedShow Answer

A company sells $200,000 in long-term bonds and buys $200,000 in inventory for cash.Which of the following statements is true?

Correct AnswerverifiedShow Answer

On October 1,2009,you borrow $200,000 at 6% interest and record the promissory note.In April and again in October of the following year,you are required to pay half the annual interest to your creditors.On December 31,2009,your journal entry for the quarter should:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
P,A,M,J,G,E,D,Q,H

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified