Question 1

Callable bonds can be converted to stock.

Accepted Answer

A) True 
 B)False

Question 2

The issuance price of a bond does not depend on

Accepted Answer

A)  the face value of the bond.
B)  the market rate of interest.
C)  the perceived risk associated with the bond.
D)  the method used to amortize the discount or premium.E) None of the above
F) C) and D)

Question 3

Bonds that are not backed by collateral are called debenture bonds.

Accepted Answer

A) True 
 B)False

Question 4

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 expenseE) B) and C)
F) None of the above

Question 5

E.Flynn Company makes a sale and collects a total of $378,which includes an 8% sales tax.The amount to be credited to Sales Revenue is

Accepted Answer

A)  $378
B)  $350
C)  $406
D)  $348E) None of the above
F) A) and B)

Question 6

Use the information above to answer the following question.What adjusting entry should Backyard make on June 30 before preparing its annual financial statements?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) All of the above
F) A) and B)

Question 7

The net amount of a bond liability that appears on the balance sheet is equal to the face value of the bond plus any related discount or minus any related premium.

Accepted Answer

A) True 
 B)False

Question 8

Because interest rates have fallen,a company retires bonds which had been issued at their face value of $200,000.The company bought the bonds back at 97.This retirement would be recorded with a:

Accepted Answer

A)  debit of $200,000 to Bonds Payable,a credit of $6,000 to Gain on Bond Retirement,and a credit of $194,000 to Cash.
B)  debit of $194,000 to Bonds Payable,a debit to Gain on Bond Retirement of $6,000,and a credit of $200,000 to Cash.
C)  debit of $200,000 to Bonds Payable,a credit of $6,000 to Interest Expense,and a credit of $194,000 to Cash.
D)  debit of $194,000 to Bonds Payable and a credit of $194,000 to Cash.E) A) and C)
F) B) and D)

Question 9

A company has current assets of $5 million and net income of $10 million.Current liabilities total $2.5 million,interest expense is $2 million,and income tax expense is $3 million.The times interest earned ratio for this company is:

Accepted Answer

A)  0.5.
B)  7.5.
C)  0.3.
D)  2.0.E) B) and C)
F) C) and D)

Question 10

When a company issues bonds that include no periodic interest payments,the bonds are called zero-coupon bonds.

Accepted Answer

A) True 
 B)False

Question 11

A company retires its bonds with a face value of $100,000 at 105.The carrying value of the bonds at the retirement date is $103,745.The journal entry to record this retirement will include a:

Accepted Answer

A)  debit to Premium on bonds payable.
B)  credit to Gain on bond retirement.
C)  credit to Bonds payable.
D)  debit to Discount on bonds payable.E) None of the above
F) B) and C)

Question 12

If a company's gross wages are $12,000,and it withholds $1,800 for income taxes and $800 for FICA taxes and other deductions,the journal entry to record the employees' pay should include a:

Accepted Answer

A)  debit to Wages Expense for $9,400.
B)  debit to Wages Payable for $9,400.
C)  credit to Wages Payable for $12,000.
D)  credit to Wages Payable for $9,400.E) None of the above
F) All of the above

Question 13

No disclosure is required for contingent liabilities that are:

Accepted Answer

A)  probable.
B)  remote.
C)  possible.
D)  likely.E) A) and D)
F) A) and C)

Question 14

Use the information above to answer the following question.What is the adjusting journal entry at December 31 to record the accrued interest on the note payable?

Accepted Answer

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

Question 15

Your company issues $500,000 in bonds at an issue price of 98.The company will record:

Accepted Answer

A)  a debit of $490,000 to cash,a debit of $10,000 to a contra-liability account to reflect the discount,and a credit of $500,000 to bonds payable.
B)  a debit of $490,000 to cash,a debit of $10,000 to a contra-asset account to reflect the discount,and a credit of $500,000 to bonds payable.
C)  a debit of $500,000 to bonds payable,a credit of $10,000 to a contra-liability account to reflect the discount,and a credit to cash of $490,000.
D)  a debit of $490,000 to bonds payable,a debit of $10,000 to a contra-asset account to reflect the discount,and a credit to cash of $500,000.E) All of the above
F) B) and C)

Question 16

Which one of the following statements is true?

Accepted Answer

A)  Liquidity refers to a company's ability to pay its current and long-term debts.
B)  A company is always considered a serious credit risk if its quick ratio is below one.
C)  All other things being equal,the existence of a line of credit enhances the ability of a company to meet its short-term obligations.
D)  Liquid assets include all current assets.E) All of the above
F) A) and D)

Question 17

Calculate the quick ratio and the times interest earned ratio for Gil's Fish and Tackle,Inc.Comment on the company's ability to pay its current liabilities and cover interest payments on debt.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Quick Ratio = Liquid Assets/Current Lia...

Question 18

When the amount of a contingent liability can be reasonably estimated and its likelihood is possible but not 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)  accrue the amount of the liability as a long-term liability.
D)  exclude any information about the contingent liability from its financial statements and notes.E) B) and D)
F) A) and B)

Question 19

The gross pay for all employees is credited to Wages Payable.

Accepted Answer

A) True 
 B)False

Question 20

The method of bond amortization that results in varying amounts of amortization each period is the straight-line amortization method.

Accepted Answer

A) True 
 B)False

Exam 10: Liabilities

The net amount of a bond liability that appears on the balance sheet is equal to the face value of the bond plus any related discount or minus any related premium.

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The gross pay for all employees is credited to Wages Payable.

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The issuance price of a bond does not depend on

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Callable bonds can be converted to stock.

Correct AnswerverifiedShow Answer

If a company's gross wages are $12,000,and it withholds $1,800 for income taxes and $800 for FICA taxes and other deductions,the journal entry to record the employees' pay should include a:

Correct AnswerverifiedShow Answer

Calculate the quick ratio and the times interest earned ratio for Gil's Fish and Tackle,Inc.Comment on the company's ability to pay its current liabilities and cover interest payments on debt.

Correct Answerverified Quick Ratio = Liquid Assets/Current Lia...View AnswerShow Answer

Bonds that are not backed by collateral are called debenture bonds.

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When a company issues bonds that include no periodic interest payments,the bonds are called zero-coupon bonds.

Correct AnswerverifiedShow Answer

E.Flynn Company makes a sale and collects a total of $378,which includes an 8% sales tax.The amount to be credited to Sales Revenue is

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What adjusting entry should Backyard make on June 30 before preparing its annual financial statements?

Correct AnswerverifiedShow Answer

No disclosure is required for contingent liabilities that are:

Correct AnswerverifiedShow Answer

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

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Your company issues $500,000 in bonds at an issue price of 98.The company will record:

Correct AnswerverifiedShow Answer

A company retires its bonds with a face value of $100,000 at 105.The carrying value of the bonds at the retirement date is $103,745.The journal entry to record this retirement will include a:

Correct AnswerverifiedShow Answer

A company has current assets of $5 million and net income of $10 million.Current liabilities total $2.5 million,interest expense is $2 million,and income tax expense is $3 million.The times interest earned ratio for this company is:

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the adjusting journal entry at December 31 to record the accrued interest on the note payable?

Correct AnswerverifiedShow Answer

The method of bond amortization that results in varying amounts of amortization each period is the straight-line amortization method.

Correct AnswerverifiedShow Answer

Because interest rates have fallen,a company retires bonds which had been issued at their face value of $200,000.The company bought the bonds back at 97.This retirement would be recorded with a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Quick Ratio = Liquid Assets/Current Lia...
View Answer

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