Question 1

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

Question 2

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.

Question 3

Liabilities that fall due within one year or within the operating cycle are classified as current liabilities.

Accepted Answer

A) True 
 B)False

Question 4

How much of the first payment made on December 31, 2009, is allocated to repayment of principal? $________

Accepted Answer

$116 [$4,116-$4,000 ...

Question 5

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.

Question 6

On April 1, Year 1, Greenway Corporation issues $20 million of 10%, 20-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1.
-The adjusting entry (if any)  required on December 31, Year 1, related to this bond issue involves:

Accepted Answer

A)   Recognition of interest expense of $1,000,000.
B)   Recognition of interest expense of $500,000.
C)   A credit to Interest Payable of $2,000,000.
D)   A credit to Cash of $500,000.

Question 7

On December 1, Year 1, Bradley Corporation incurs a 15-year $200,000 mortgage liability in conjunction with the acquisition of an office building. This mortgage is payable in monthly installments of $2,400, which include interest computed at the rate of 12% per year. The first monthly payment is made on December 31, Year 1.
-At the end of 2010 it is discovered that the accountant for Gower Company failed to record $60,000 of interest payable which had accrued since the last interest payment date. The current ratio, quick ratio, and debt ratio, as well as the financial statements, had already been computed using the erroneous data. Correction of the accounting records will have which of the following effects?

Accepted Answer

A)   Net income as formerly computed will not be affected by the correction of the error.
B)   The interest coverage ratio as formerly computed will not change as a result of the correction.
C)   The debt ratio as formerly computed will decrease as a result of the correction.
D)   The quick ratio as formerly computed will decrease as a result of the correction.

Question 8

The annual "take-home-pay" of Rose' employees is:

Accepted Answer

A)   $2,520,000.
B)   $2,250,000.
C)   $1,930,000.
D)   $2,750,000.

Question 9

The amortization of a bond discount:

Accepted Answer

A)   Decreases the carrying value of a bond and increases interest expense.
B)   Decreases the carrying value of a bond and decreases interest expense.
C)   Increases the carrying value of a bond and increases interest expense.
D)   Increases the carrying value of a bond and decreases interest expense.

Question 10

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. C

Question 11

On September 1, 2011, Select Company borrowed $600,000 from a bank and signed a 12%, six-month note payable, with interest on the note due at maturity.
-On November 1 of the current year, Garcia Company borrowed $50,000 by issuing a 9%, six-month note payable, all due at maturity date. Interest expense on this note to be recognized during the current year amounts to:

Accepted Answer

A)   $500.
B)   $750.
C)   $1,500.
D)   $4,500.

Question 12

Which one of the following is not considered a criteria to capitalize a lease?

Accepted Answer

A)   The lease contains a bargain purchase option.
B)   The lease transfers ownership at the end of the lease term.
C)   The lease term is more than 75% of economic life of the property.
D)   The present value of minimum lease payments is less than 90% of the fair market value of the asset.

Question 13

The Music House issues a contract to a new recording artist to produce a number of albums over the next five years at $1 million per album. This situation is an example of:

Accepted Answer

A)   A contingent liability which should be recorded in the accounting records.
B)   A contingent liability requiring footnote disclosure.
C)   An estimated liability, since the number of albums to be produced is not yet determined.
D)   A commitment which, if material, may be disclosed in a footnote.

Question 14

On October 1, Dalton Corp. borrows $100,000 from National Bank, signing a six-month note payable for that amount, plus interest to be computed at a rate of 9% per annum. Indicate all correct answers.

Accepted Answer

A)   Dalton's liability at October 1 is only $100,000.
B)   The maturity value of this note is $104,500.
C)   At December 31, Dalton will have a liability for accrued interest payable in the amount of $4,500.
D)   Dalton's total liability for this loan at November 30 is $101,500.

Question 15

A discount on bonds payable is best described as:

Accepted Answer

A)   An element of future interest expense.
B)   A bonus paid by the bondholders to the issuing corporation because of the unusually high interest rate stated in the bonds.
C)   The present value of the future interest payments of bond interest and principal.
D)   An amount below par which the bondholders may be called upon to make good.

Question 16

How much interest expense will Noble recognize on this note in Year 2?

Accepted Answer

A)   $9,600.
B)   $4,800.
C)   $2,400.
D)   $3,200.

Question 17

The current portion of long-term debt should be reported separately in the current liabilities section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

On April 1, year 1, Cricket Corporation issues $60 million of 12%, 10-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1.
-The adjustment necessary at December 31, Year 1 (if any) , related to this bond issue involves:

Accepted Answer

A)   Recognition of interest expense of $3,600,000.
B)   Recognition of interest expense of $1,800,000.
C)   Payment of cash of $1,800,000.
D)   There is no adjustment necessary.

Question 19

How much must Central Food pay the lender upon maturity of this note?

Accepted Answer

A)   $140,700.
B)   $140,000.
C)   $147,700.
D)   $148,400. D

Question 20

At December 31, Year 1, the adjusting entry with respect to this note includes a:

Accepted Answer

A)   Credit to Interest Payable for $1,600.
B)   Credit to Notes Payable for $1,600.
C)   Debit to Interest Expense for $3,200.
D)   Credit to Cash for $3,200.

Exam 10: Liabilities

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

Correct Answer
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A

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

Correct Answer
verified

Liabilities that fall due within one year or within the operating cycle are classified as current liabilities.

Correct Answer
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How much of the first payment made on December 31, 2009, is allocated to repayment of principal? $________

Correct Answer
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$116 [$4,116-$4,000 ...
View Answer

Correct Answer
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On April 1, Year 1, Greenway Corporation issues $20 million of 10%, 20-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1. -The adjusting entry (if any) required on December 31, Year 1, related to this bond issue involves:

Correct Answer
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Correct Answer
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The annual "take-home-pay" of Rose' employees is:

Correct Answer
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The amortization of a bond discount:

Correct Answer
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Correct Answer
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C

Correct Answer
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Which one of the following is not considered a criteria to capitalize a lease?

Correct Answer
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The Music House issues a contract to a new recording artist to produce a number of albums over the next five years at $1 million per album. This situation is an example of:

Correct Answer
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On October 1, Dalton Corp. borrows $100,000 from National Bank, signing a six-month note payable for that amount, plus interest to be computed at a rate of 9% per annum. Indicate all correct answers.

Correct Answer
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A discount on bonds payable is best described as:

Correct Answer
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How much interest expense will Noble recognize on this note in Year 2?

Correct Answer
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The current portion of long-term debt should be reported separately in the current liabilities section of the balance sheet.

Correct Answer
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On April 1, year 1, Cricket Corporation issues $60 million of 12%, 10-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1. -The adjustment necessary at December 31, Year 1 (if any) , related to this bond issue involves:

Correct Answer
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How much must Central Food pay the lender upon maturity of this note?

Correct Answer
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D

At December 31, Year 1, the adjusting entry with respect to this note includes a:

Correct Answer
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Exam 10: Liabilities

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

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

Liabilities that fall due within one year or within the operating cycle are classified as current liabilities.

Correct AnswerverifiedShow Answer

How much of the first payment made on December 31, 2009, is allocated to repayment of principal? $________

Correct Answerverified$116 [$4,116-$4,000 ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

On April 1, Year 1, Greenway Corporation issues $20 million of 10%, 20-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1. -The adjusting entry (if any) required on December 31, Year 1, related to this bond issue involves:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The annual "take-home-pay" of Rose' employees is:

Correct AnswerverifiedShow Answer

The amortization of a bond discount:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

Which one of the following is not considered a criteria to capitalize a lease?

Correct AnswerverifiedShow Answer

The Music House issues a contract to a new recording artist to produce a number of albums over the next five years at $1 million per album. This situation is an example of:

Correct AnswerverifiedShow Answer

On October 1, Dalton Corp. borrows $100,000 from National Bank, signing a six-month note payable for that amount, plus interest to be computed at a rate of 9% per annum. Indicate all correct answers.

Correct AnswerverifiedShow Answer

A discount on bonds payable is best described as:

Correct AnswerverifiedShow Answer

How much interest expense will Noble recognize on this note in Year 2?

Correct AnswerverifiedShow Answer

The current portion of long-term debt should be reported separately in the current liabilities section of the balance sheet.

Correct AnswerverifiedShow Answer

On April 1, year 1, Cricket Corporation issues $60 million of 12%, 10-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1. -The adjustment necessary at December 31, Year 1 (if any) , related to this bond issue involves:

Correct AnswerverifiedShow Answer

How much must Central Food pay the lender upon maturity of this note?

Correct AnswerverifiedD

At December 31, Year 1, the adjusting entry with respect to this note includes a:

Correct AnswerverifiedShow Answer

Correct Answer
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A

Correct Answer
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Correct Answer
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$116 [$4,116-$4,000 ...
View Answer

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C

Correct Answer
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D

Correct Answer
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