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A company has bonds outstanding with a face value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the journal entry to record this retirement includes a debit to:


A) Bonds Payable for $100,000,a debit to Premium on Bonds Payable for $2,700,a credit to Cash for $99,000,and a credit to Gain on Bond Retirement for $3,700.
B) Bonds Payable for $100,000,a debit to Loss on Bond Retirement for $1,700,a credit to Cash for $99,000,and a credit to Premium on Bonds Payable for $2,700.
C) Bonds Payable for $100,000,credit to Cash for $99,000,and a credit to Gain on Bond Retirement for $1,000.
D) Bonds Payable for $100,000,a debit to Loss on Bond Retirement for $1,673,and a credit to Cash for $101,673.

E) A) and B)
F) C) and D)

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


A) debenture bonds.
B) convertible bonds.
C) secured bonds.
D) registered bonds.

E) A) and B)
F) A) and C)

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Your company sells $50,000 of bonds for an issue price of $52,000.Which of the following statements is correct?


A) The bond sold at a price of 52,implying a premium of $2,000.
B) The bond sold at a price of 104,implying a discount of $2,000.
C) The bond sold at a price of 52,implying a discount of $2,000.
D) The bond sold at a price of 104,implying a premium of $2,000.

E) B) and D)
F) None of the above

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When preparing the balance sheet for Papago Co.for December 31,2018,which item would not be classified as a current liability?


A) Note payable due March 1,2020
B) Accounts payable
C) Income taxes due on September 15,2019
D) The current portion of a 30-year mortgage

E) A) and C)
F) A) and D)

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The issue price of a bond is:


A) always equal to $1,000.
B) based on a present value calculation.
C) determined by the company issuing the bonds.
D) determined by the financial advisers.

E) None of the above
F) C) and D)

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On October 1,2018,Highview Company borrows $360,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30.On December 31,2018,the adjusting entry to accrue interest on the note should debit:


A) Interest Expense and credit Interest Payable for $5,400.
B) Interest Payable and credit Interest Expense for $5,400.
C) Interest Expense and credit Cash for $10,800.
D) Interest Expense and credit Interest Payable for $10,800.

E) A) and D)
F) A) and B)

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The principal of a loan does not include any interest charges.

A) True
B) False

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Which of the following would not be considered a contingent liability?


A) Products sold with a warranty
B) Pending lawsuits
C) Frequent flyer miles earned by passengers
D) Cash received from advance ticket sales

E) A) and D)
F) A) and C)

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On January 1,2018,a company issues 3-year bonds with a face value of $560,000 and a stated interest rate of 8%.Because the market interest rate is higher than the stated interest rate,the company receives $543,200 for the bond. Required: Part a.Determine the amount of the discount that will be amortized during the year ending December 31,2018. Part b.Prepare the journal entry to record the first interest payment on December 31,2018.

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Part a
Discount on bonds payab...

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Oasis Company received $391,800 for bonds having a total face value of $400,000. What journal entry would be made to record this bond issuance?


A) Debit Cash for $391,800,debit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $400,000
B) Debit Cash for $400,000,credit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $391,800
C) Debit Cash for $400,000 and credit Bonds Payable for $400,000
D) Debit Cash for $400,000,credit Bonds Payable for $391,800,and credit Interest Payable for $8,200

E) A) and D)
F) C) and D)

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Which of the following statements about bonds and notes is not correct?


A) A company can borrow the funds necessary to finance its activities using bonds or promissory notes.
B) Borrowings using bonds or notes are initially recorded with a journal entry that debits Cash and credits the relevant liability account.
C) The journal entry that records interest owed on bonds and notes includes a debit to Interest Expense and a credit to Interest Payable.
D) Bonds Payable and Notes Payable are always classified as noncurrent liability accounts.

E) B) and D)
F) None of the above

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Sun Ridge,Inc.reported the following information in its accounting records on December 31,2018:  Gross salaries earned by employees (December 29-31) $12,960 Income taxes withheld from employees (December 29-31) 1,980 FICA taxes withheld from employees (December 29-31) 756‾ Net payment to employees (made on December 31) $10,224\begin{array}{lr}\text { Gross salaries earned by employees (December 29-31) } & \$ 12,960 \\\text { Income taxes withheld from employees (December 29-31) } & 1,980 \\\text { FICA taxes withheld from employees (December 29-31) } & \underline{756} \\\text { Net payment to employees (made on December 31) } & \$ 10,224\end{array} The employees were paid $10,224 on December 31,2018,but the withholdings have not yet been remitted nor have the matching employer FICA contributions. Required: Part a.Compute the total payroll costs relating to the period from December 29-31.(Assume $1,008 in total unemployment taxes. ) Part b.Provide the journal entries on December 31 to adjust for salaries and wages relating to December 29-31,2018. Part c.Provide the journal entries on December 31 to adjust for payroll taxes relating to December 29-31,2018.

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Part a
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Pa...

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Sales tax collected by a company is normally reported as:


A) a current liability.
B) income tax expense.
C) an asset.
D) an operating expense.

E) A) and B)
F) B) and C)

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A 6-month note is issued on October 1.If no previous accruals have been made,how many months of interest should be accrued at December 31?


A) Six
B) Three
C) Four
D) Two

E) None of the above
F) A) and B)

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The premium on a bond is ________ and ________ each period.


A) depreciated;increases
B) expensed;increases
C) increased;credited
D) amortized;decreases

E) B) and C)
F) A) and D)

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Your company issues $500,000 in bonds at a price of 98.The journal entry used to record the issuance will include a debit to:


A) Cash for $490,000,a debit to Discount on Bonds Payable for $10,000,and a credit to Bonds Payable for $500,000.
B) Cash for $490,000,a credit to Discount on Bonds Payable for $10,000,and a credit to Bonds Payable for $500,000.
C) Bonds Payable for $500,000,a credit to Discount on Bonds Payable for $10,000,and a credit to Cash for $490,000.
D) Bonds Payable for $490,000,a debit to Discount on Bonds Payable for $10,000,and a credit to Cash for $500,000.

E) B) and D)
F) B) and C)

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When interest is accrued on a note payable,but not paid,the


A) Interest Expense account is increased;the Interest Payable account is increased.
B) Interest Expense account is decreased;the Interest Payable account is increased.
C) Notes Payable account is increased;the Interest Payable account is increased.
D) Interest Expense account is increased;the Interest Payable account is decreased.

E) A) and B)
F) All of the above

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Worthington Co.issues $500,000 of 5-year,6% bonds on January 1,2018. Required: Prepare the journal entry to record the issuance of the bonds under each of the following assumptions: Part a.The bonds are sold at 100. Part b.The bonds are sold at 102. Part c.The bonds are sold at 96.

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Part a
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The journal entry to record employer payroll taxes affects:


A) assets only.
B) liabilities only.
C) liabilities and stockholders' equity.
D) assets and liabilities.

E) C) and D)
F) A) and B)

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The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

A) True
B) False

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