Question 1

Which of the following must be paid by both the employee and the employer?

Accepted Answer

A)   FICA taxes
B)   State unemployment tax
C)   State withholding tax
D)   Federal unemployment taxE) A) and B)
F) All of the above

Question 2

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

Accepted Answer

A)   bond certificate.
B)   loan covenant.
C)   renegotiation.
D)   contingent liability.E) All of the above
F) None of the above

Question 3

Zorn Inc.makes a sale for $300.The company is required to collect sales taxes amounting to 9%.What is the amount that will be credited to the Sales Tax Payable account?

Accepted Answer

A)   $27
B)   $273
C)   $300
D)   $327E) A) and D)
F) B) and C)

Question 4

Payroll deductions:

Accepted Answer

A)   are amounts added to employees' gross earnings to determine their net pay.
B)   are all voluntary increase the amount of cash an employee receives.
C)   are amounts subtracted from employees' gross earnings to determine their net pay.D) B) and C)
E) All of the above

Question 5

Operating cycles are generally longer than a year.

Accepted Answer

A) True 
 B)False

Question 6

Hubbard Street Dance Company sells subscriptions for its monthly dance performances.The company received annual subscription payments on November 15,2015 for performances that will take place during 2016 in the amount of $120,000.The subscription payments will be earned equally throughout each month.
Required:
Part a.Describe how the subscription payments should be reported in the balance sheet and income statement on December 31,2015
Part b.Describe how the subscription payments should be reported in the balance sheet and income statement on January 31,2016.
Part c.Prepare the journal entry for the receipt of annual subscription payments on November 15,2015.
Part d.Prepare the required adjusting entry for the subscription payments on January 31,2016.

Accepted Answer

Part a
On December 31,2015,the $120,000 ...

Question 7

The entry to record the issuance of a note for cash was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

Accepted Answer

A)   assets to be understated.
B)   liabilities to be overstated .
C)   stockholders' equity to be understated.
D)   stockholders' equity to be overstated.E) None of the above
F) A) and B)

Question 8

Bondholders are willing to pay a premium to acquire a bond because the:

Accepted Answer

A)   company has a low credit rating.
B)   bond's stated interest rate is higher than the market interest rate.
C)   bond's stated interest rate is lower than the market interest rate.
D)   bond's stated interest rate is equal to the market interest rate.E) C) and D)
F) All of the above

Question 9

Choose the appropriate letter to match the term and the definition.Not all definitions will be used.
Term:
1._____ Current liabilities
2._____ Effective interest method of amortization
3._____ Straight-line method of amortization
4._____ Times interest earned ratio
5._____ Long-term liabilities
6._____ Present value
Definition:
A.A bond feature that puts a creditor ahead of other creditors in order of payment.
B.Current liabilities divided by current assets.
C.These are liabilities that have to be paid in one year or less.
D.Net income before taxes and interest expense divided by interest expense.
E.Spreads a bond discount or premium evenly over the lifetime of the bond.
F.The amount of all the liabilities currently on the balance sheet at the close of the period.
G.Where interest expense is the market interest rate times the bond's carrying value.
H.Net income after taxes and interest expense divided by interest expense.
I.These are liabilities that do not have to be paid within the upcoming year.
J.The ability to pay current obligations.
K.Liquid assets divided by current liabilities.
L.A calculation that determines what some future payments are worth today.

Accepted Answer

1.C
2.G
3....

Question 10

Employer payroll taxes:

Accepted Answer

A)   represent the federal taxes withheld from the employees' paychecks.
B)   are the amounts paid by the employee.
C)   are an added payroll expense beyond the wages and salaries earned by employees.
D)   represent the FICA taxes withheld from employees' paychecks.E) A) and C)
F) B) and C)

Question 11

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

Question 12

A contingent liability is:

Accepted Answer

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

Question 13

Use the information above to answer the following question.What journal entry would be made to record this bond issuance?

Accepted Answer

A)   Debit Cash for $783,600, debit Discount on Bonds Payable for $16,400, and credit Bonds Payable for $800,000
B)   Debit Cash for $800,000, credit Discount on Bonds Payable for $16,400, and credit Bonds Payable for $783,600
C)   Debit Cash for $800,000 and credit Bonds Payable for $800,000
D)   Debit Cash for $800,000, credit Bonds Payable for $783,600, and credit Interest Payable for $16,400E) A) and B)
F) All of the above

Question 14

The Discount on Bonds Payable account is reported in the financial statements as:

Accepted Answer

A)   a reduction from the Bond Payable account 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) None of the above
F) B) and C)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Your company sells $50,000 of bonds for an issue price of $48,000.Which of the following statements is correct?

Accepted Answer

A)   The bond sold at a price of 96, implying a discount of $4,000.
B)   The bond sold at a price of 48, implying a premium of $2,000.
C)   The bond sold at a price of 48, implying a premium of $4,000.
D)   The bond sold at a price of 96, implying a discount of $2,000.E) B) and C)
F) A) and D)

Question 17

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

Accepted Answer

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

Question 18

A company pays $18,000 in interest on notes,consisting of $12,000 interest that was accrued during the last accounting period and $6,000 of interest that accumulated during the current accounting period but has not yet been accrued 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 B)
F) A) and D)

Question 19

What kind of account is Unearned Revenue?

Accepted Answer

A)   Asset
B)   Liability
C)   Revenue
D)   ExpenseE) C) and D)
F) B) and C)

Question 20

Bonds that are not backed by collateral are referred to as "debentures."

Accepted Answer

A) True 
 B)False

Exam 10: Reporting and Interpreting Liabilities

The Discount on Bonds Payable account is reported in the financial statements as:

Correct Answer
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Operating cycles are generally longer than a year.

Correct Answer
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Your company sells $50,000 of bonds for an issue price of $48,000.Which of the following statements is correct?

Correct Answer
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Employer payroll taxes:

Correct Answer
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Zorn Inc.makes a sale for $300.The company is required to collect sales taxes amounting to 9%.What is the amount that will be credited to the Sales Tax Payable account?

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 a:

Correct Answer
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Correct Answer
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1.C
2.G
3....
View Answer

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

Correct Answer
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Use the information above to answer the following question.What journal entry would be made to record this bond issuance?

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

Correct Answer
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Bondholders are willing to pay a premium to acquire a bond because the:

Correct Answer
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Bonds that are not backed by collateral are referred to as "debentures."

Correct Answer
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Which of the following must be paid by both the employee and the employer?

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

Correct Answer
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What kind of account is Unearned Revenue?

Correct Answer
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A company pays $18,000 in interest on notes,consisting of $12,000 interest that was accrued during the last accounting period and $6,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books.The journal entry for the interest payment should:

Correct Answer
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A contingent liability is:

Correct Answer
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Correct Answer
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Part a
On December 31,2015,the $120,000 ...
View Answer

Payroll deductions:

Correct Answer
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The entry to record the issuance of a note for cash was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

Correct Answer
verified

Exam 10: Reporting and Interpreting Liabilities

The Discount on Bonds Payable account is reported in the financial statements as:

Correct AnswerverifiedShow Answer

Operating cycles are generally longer than a year.

Correct AnswerverifiedShow Answer

Your company sells $50,000 of bonds for an issue price of $48,000.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Employer payroll taxes:

Correct AnswerverifiedShow Answer

Zorn Inc.makes a sale for $300.The company is required to collect sales taxes amounting to 9%.What is the amount that will be credited to the Sales Tax Payable account?

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 a:

Correct AnswerverifiedShow Answer

Correct Answerverified1.C2.G3....View AnswerShow 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 journal entry would be made to record this bond issuance?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Bondholders are willing to pay a premium to acquire a bond because the:

Correct AnswerverifiedShow Answer

Bonds that are not backed by collateral are referred to as "debentures."

Correct AnswerverifiedShow Answer

Which of the following must be paid by both the employee and the employer?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What kind of account is Unearned Revenue?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A contingent liability is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart aOn December 31,2015,the $120,000 ...View AnswerShow Answer

Payroll deductions:

Correct AnswerverifiedShow Answer

The entry to record the issuance of a note for cash was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

Correct AnswerverifiedShow Answer

Correct Answer
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1.C
2.G
3....
View Answer

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Part a
On December 31,2015,the $120,000 ...
View Answer

Correct Answer
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Correct Answer
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