Question 1

Winrow Company received proceeds of $754,000 on 10-year, 8% bonds issued on January 1, 2016. The bonds had a face value of $800,000, pay interest annually on December 31st, and have a call price of 101. Winrow uses the straight-line method of amortization. What is the carrying value of the bonds on January 1, 2018?

Accepted Answer

A)  $800,000
B)  $763,200
C)  $790,800
D)  $758,600E) A) and B)
F) All of the above

Question 2

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

Accepted Answer

A) True 
 B)False

Question 3

Bonds are a form of interest-bearing notes payable.

Accepted Answer

A) True 
 B)False

Question 4

Bonds are not always categorized as

Accepted Answer

A)  callable or convertible.
B)  term or serial.
C)  secured or unsecured.
D)  secured or debenture.E) None of the above
F) A) and D)

Question 5

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

Accepted Answer

A) True 
 B)False

Question 6

The classification of a liability as current or noncurrent is important because it may affect the evaluation of a company's liquidity.

Accepted Answer

A) True 
 B)False

Question 7

The sale of bonds above face value

Accepted Answer

A)  is a rare occurrence.
B)  will cause the total cost of borrowing to be less than the bond interest paid.
C)  will cause the total cost of borrowing to be more than the bond interest paid.
D)  will have no net effect on interest expense by the time the bonds mature.E) None of the above
F) All of the above

Question 8

Bonds that are issued against the general credit of the borrower are called

Accepted Answer

A)  callable bonds.
B)  debenture bonds.
C)  secured bonds.
D)  term bonds.E) C) and D)
F) B) and C)

Question 9

Unearned revenues are received before goods are delivered or services are rendered.

Accepted Answer

A) True 
 B)False

Question 10

If bonds are issued at a premium, the stated interest rate is

Accepted Answer

A)  higher than the market rate of interest.
B)  lower than the market rate of interest.
C)  too low to attract investors.
D)  adjusted to a higher rate of interest.E) A) and B)
F) B) and D)

Question 11

When authorizing bonds to be issued, the board of directors does not specify the

Accepted Answer

A)  total number of bonds authorized to be sold.
B)  contractual interest rate.
C)  selling price.
D)  total face value of the bonds.E) B) and C)
F) None of the above

Question 12

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity.

Accepted Answer

A) True 
 B)False

Question 13

Downs Company issued $800,000 of 8%, 5-year bonds at 106, which pay interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Accepted Answer

A)  $368,000
B)  $272,000
C)  $224,000
D)  $320,000E) All of the above
F) C) and D)

Question 14

A $1,000,000 bond was retired at 98 when the carrying value of the bond was $985,000. The entry to record the retirement would include a

Accepted Answer

A)  gain on bond redemption of $15,000.
B)  loss on bond redemption of $5,000.
C)  loss on bond redemption of $15,000.
D)  gain on bond redemption of $5,000.E) B) and C)
F) All of the above

Question 15

Current liabilities are due

Accepted Answer

A)  but not receivable for more than one year.
B)  but not payable for more than one year.
C)  and receivable within one year.
D)  and payable within one year.E) A) and B)
F) A) and C)

Question 16

The higher the sales tax rate, the more profit a retailer can earn.

Accepted Answer

A) True 
 B)False

Question 17

Interest expense on a note payable is only recorded at maturity.

Accepted Answer

A) True 
 B)False

Question 18

Restoration Company issued bonds that had the following data associated with them:
Interest to be paid is $40,000.
Interest expense to be recorded is $45,000.
Which of the following characteristics is true?

Accepted Answer

A)  The bonds are sold at a premium.
B)  When recording the interest expense, the amortization will decrease the bond carrying value.
C)  The difference between the interest expense and the interest to be paid is the bond's par value.
D)  When recording the interest expense, the amortization will increase the bond carrying value.E) C) and D)
F) A) and B)

Question 19

The amount of sales tax collected by a retail store when making sales is

Accepted Answer

A)  a miscellaneous revenue for the store.
B)  a current liability.
C)  not recorded because it is a tax paid by the customer.
D)  recorded as an operating expense.E) A) and C)
F) All of the above

Question 20

A cash register tape shows cash sales of $3,000 and sales taxes of $200. The journal entry to record this information is

Accepted Answer

The answer of A cash register tape shows cash sales...

Exam 9: Reporting and Analyzing Liabilities

Current liabilities are due

Correct Answer
verified

Downs Company issued $800,000 of 8%, 5-year bonds at 106, which pay interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Correct Answer
verified

A cash register tape shows cash sales of $3,000 and sales taxes of $200. The journal entry to record this information is

Correct Answer
verified

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity.

Correct Answer
verified

Unearned revenues are received before goods are delivered or services are rendered.

Correct Answer
verified

If bonds are issued at a premium, the stated interest rate is

Correct Answer
verified

Bonds that are issued against the general credit of the borrower are called

Correct Answer
verified

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

Correct Answer
verified

Bonds are not always categorized as

Correct Answer
verified

A $1,000,000 bond was retired at 98 when the carrying value of the bond was $985,000. The entry to record the retirement would include a

Correct Answer
verified

The higher the sales tax rate, the more profit a retailer can earn.

Correct Answer
verified

When authorizing bonds to be issued, the board of directors does not specify the

Correct Answer
verified

The amount of sales tax collected by a retail store when making sales is

Correct Answer
verified

The classification of a liability as current or noncurrent is important because it may affect the evaluation of a company's liquidity.

Correct Answer
verified

The sale of bonds above face value

Correct Answer
verified

Interest expense on a note payable is only recorded at maturity.

Correct Answer
verified

Bonds are a form of interest-bearing notes payable.

Correct Answer
verified

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

Correct Answer
verified

Restoration Company issued bonds that had the following data associated with them: Interest to be paid is $40,000. Interest expense to be recorded is $45,000. Which of the following characteristics is true?

Correct Answer
verified

Correct Answer
verified

Exam 9: Reporting and Analyzing Liabilities

Current liabilities are due

Correct AnswerverifiedShow Answer

Downs Company issued $800,000 of 8%, 5-year bonds at 106, which pay interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Correct AnswerverifiedShow Answer

A cash register tape shows cash sales of $3,000 and sales taxes of $200. The journal entry to record this information is

Correct AnswerverifiedShow Answer

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity.

Correct AnswerverifiedShow Answer

Unearned revenues are received before goods are delivered or services are rendered.

Correct AnswerverifiedShow Answer

If bonds are issued at a premium, the stated interest rate is

Correct AnswerverifiedShow Answer

Bonds that are issued against the general credit of the borrower are called

Correct AnswerverifiedShow Answer

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

Correct AnswerverifiedShow Answer

Bonds are not always categorized as

Correct AnswerverifiedShow Answer

A $1,000,000 bond was retired at 98 when the carrying value of the bond was $985,000. The entry to record the retirement would include a

Correct AnswerverifiedShow Answer

The higher the sales tax rate, the more profit a retailer can earn.

Correct AnswerverifiedShow Answer

When authorizing bonds to be issued, the board of directors does not specify the

Correct AnswerverifiedShow Answer

The amount of sales tax collected by a retail store when making sales is

Correct AnswerverifiedShow Answer

The classification of a liability as current or noncurrent is important because it may affect the evaluation of a company's liquidity.

Correct AnswerverifiedShow Answer

The sale of bonds above face value

Correct AnswerverifiedShow Answer

Interest expense on a note payable is only recorded at maturity.

Correct AnswerverifiedShow Answer

Bonds are a form of interest-bearing notes payable.

Correct AnswerverifiedShow Answer

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

Correct AnswerverifiedShow Answer

Restoration Company issued bonds that had the following data associated with them: Interest to be paid is $40,000. Interest expense to be recorded is $45,000. Which of the following characteristics is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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