Question 1

The gross earnings for all employees is credited to Salaries and Salaries and Wages Payable.

Accepted Answer

A) True 
 B)False

Question 2

Use the information above to answer the following question.The journal entry to record this transaction would include the receipt of cash on November 1 a credit to:

Accepted Answer

A)   Cash
B)   Unearned Revenue
C)   Dance Lessons Revenue
D)   Dance Lessons PayableE) B) and C)
F) C) and D)

Question 3

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

Accepted Answer

A)   debenture bonds.
B)   convertible bonds.
C)   secured bonds.
D)   registered bonds.E) A) and D)
F) B) and C)

Question 4

When the times interest earned ratio increases,the likelihood of default on liabilities decreases.

Accepted Answer

A) True 
 B)False

Question 5

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n) :

Accepted Answer

A)   increase in stockholders' equity.
B)   decrease in assets.
C)   decrease in stockholders' equity.
D)   increase in liabilities.E) All of the above
F) A) and B)

Question 6

Accruing a liability always involves ______ expenses and ______ liabilities.

Accepted Answer

A)   increasing; increasing
B)   increasing; decreasing
C)   decreasing; increasing
D)   decreasing; decreasingE) A) and C)
F) C) and D)

Question 7

ABC Company received $9,631 for its 5-year,10% bonds with a total face value of $10,000.The market rate of interest was 11%.The bonds pay interest annually on December 31.Approximately how much interest expense will ABC Corporation record on the first annual interest payment date using the effective-interest method?

Accepted Answer

A)   $1,059
B)   $1,000
C)   $1,074
D)   $963.10E) B) and C)
F) A) and D)

Question 8

Employees' gross earnings differ from their net pay because of:

Accepted Answer

A)   unemployment taxes.
B)   payroll deductions.
C)   accounts payable.
D)   corporate income taxes.E) A) and D)
F) A) and B)

Question 9

A 10-year bond that pays interest annually was issued at a $5,000 premium.The entry to record the payment of interest using straight-line amortization will include a ______ to Premium on Bonds Payable for ______ each period.

Accepted Answer

A)   credit; $500
B)   debit; $500
C)   debit; a greater amount each period
D)   credit; a lower amount each periodE) A) and D)
F) A) and B)

Question 10

Sales taxes are recorded by the retailer as:

Accepted Answer

A)   Sales Tax Expense.
B)   Sales Tax Payable.
C)   Sales Revenue.
D)   Sales Returns and Allowances.E) B) and C)
F) A) and D)

Question 11

On October 1,2015,Bill Burns borrowed $170,000 from the New National Bank on a 6-month,6% note.Assuming no interest has been recorded yet,what is the amount of accrued interest as of December 31,2015?

Accepted Answer

A)   $5,100
B)   $2,550
C)   $10,200
D)   $7,650E) A) and B)
F) C) and D)

Question 12

Bonds that are backed by collateral are referred to as:

Accepted Answer

A)   debentures.
B)   secured.
C)   callable.
D)   convertible.E) None of the above
F) A) and C)

Question 13

An entertainment company received $6 million in cash for advance season ticket sales.Prior to the beginning of the season,these sales should be recorded as a liability.

Accepted Answer

A) True 
 B)False

Question 14

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Your company used the effective-interest method of amortization.At the end of the first year,your company should:

Accepted Answer

A)   debit Interest Expense for $543, debit Premium on Bonds Payable for $157, and credit Interest Payable for $700.
B)   debit Interest Expense for $700, credit Premium on Bonds Payable for $157, and credit Interest Payable for $543.
C)   debit Interest Expense for $700, debit Premium on Bonds Payable for $157, and credit Interest Payable for $543.
D)   debit Interest Expense for $543 and credit Interest Payable for $543.E) C) and D)
F) A) and B)

Question 15

On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds.
Required:
Fill in the table assuming the company uses effective-interest bond amortization.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> * Carryin...

Question 16

Engstrom Company makes a sale and collects a total of $378,which includes an 8% sales tax.What is the amount that will be credited to the Sales Revenue account?

Accepted Answer

A)   $378
B)   $350
C)   $406
D)   $348E) A) and C)
F) B) and C)

Question 17

Which of the following statements about a 10-year bond issued at a discount is not correct?

Accepted Answer

A)   At the end of ten years, the balance in the Discount on Bonds Payable account will equal zero.
B)   At the end of ten years, the carrying value will equal the face value.
C)   At the end of ten years, the total interest expense will reflect the market rate of interest.
D)   At the end of ten years, the total interest expense will equal the total interest paid.E) A) and B)
F) B) and C)

Question 18

When a company has a contingent liability that is remote in likelihood,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 notes.E) B) and C)
F) C) and D)

Question 19

John Smith works 40 hours for ABC Corp.for $15 per hour.Required payroll deductions are: Social Security $37.20; Medicare $8.70; Federal income tax $58; and State income tax $10.The entry to record his net pay would cause which of the following to change as described?

Accepted Answer

A)   Salaries and Wages Expense increases by $600.
B)   Salaries and Wages Expense decreases by $600.
C)   Salaries and Wages Payable increases by $600.
D)   Salaries and Wages Payable decreases by $600.E) A) and B)
F) All of the above

Question 20

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

Accepted Answer

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

Exam 10: Reporting and Interpreting Liabilities

Accruing a liability always involves expenses and liabilities.

Correct Answer
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Correct Answer
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The entry to record the initial borrowing of cash by issuing a promissory note causes a(n) :

Correct Answer
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An entertainment company received $6 million in cash for advance season ticket sales.Prior to the beginning of the season,these sales should be recorded as a liability.

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

Correct Answer
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On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Your company used the effective-interest method of amortization.At the end of the first year,your company should:

Correct Answer
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When the times interest earned ratio increases,the likelihood of default on liabilities decreases.

Correct Answer
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Bonds that are backed by collateral are referred to as:

Correct Answer
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Use the information above to answer the following question.The journal entry to record this transaction would include the receipt of cash on November 1 a credit to:

Correct Answer
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Employees' gross earnings differ from their net pay because of:

Correct Answer
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The gross earnings for all employees is credited to Salaries and Salaries and Wages Payable.

Correct Answer
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Sales taxes are recorded by the retailer as:

Correct Answer
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Which of the following statements about a 10-year bond issued at a discount is not correct?

Correct Answer
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When a company has a contingent liability that is remote in likelihood,the company should:

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

Correct Answer
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On October 1,2015,Bill Burns borrowed $170,000 from the New National Bank on a 6-month,6% note.Assuming no interest has been recorded yet,what is the amount of accrued interest as of December 31,2015?

Correct Answer
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John Smith works 40 hours for ABC Corp.for $15 per hour.Required payroll deductions are: Social Security $37.20; Medicare $8.70; Federal income tax $58; and State income tax $10.The entry to record his net pay would cause which of the following to change as described?

Correct Answer
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Engstrom Company makes a sale and collects a total of $378,which includes an 8% sales tax.What is the amount that will be credited to the Sales Revenue account?

Correct Answer
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On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds. Required: Fill in the table assuming the company uses effective-interest bond amortization.

Correct Answer
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View Answer

A 10-year bond that pays interest annually was issued at a $5,000 premium.The entry to record the payment of interest using straight-line amortization will include a to Premium on Bonds Payable for each period.

Correct Answer
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Exam 10: Reporting and Interpreting Liabilities

Accruing a liability always involves ______ expenses and ______ liabilities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n) :

Correct AnswerverifiedShow Answer

An entertainment company received $6 million in cash for advance season ticket sales.Prior to the beginning of the season,these sales should be recorded as a liability.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On January 1,your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $10,866.Your company used the effective-interest method of amortization.At the end of the first year,your company should:

Correct AnswerverifiedShow Answer

When the times interest earned ratio increases,the likelihood of default on liabilities decreases.

Correct AnswerverifiedShow Answer

Bonds that are backed by collateral are referred to as:

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.The journal entry to record this transaction would include the receipt of cash on November 1 a credit to:

Correct AnswerverifiedShow Answer

Employees' gross earnings differ from their net pay because of:

Correct AnswerverifiedShow Answer

The gross earnings for all employees is credited to Salaries and Salaries and Wages Payable.

Correct AnswerverifiedShow Answer

Sales taxes are recorded by the retailer as:

Correct AnswerverifiedShow Answer

Which of the following statements about a 10-year bond issued at a discount is not correct?

Correct AnswerverifiedShow Answer

When a company has a contingent liability that is remote in likelihood,the company should:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On October 1,2015,Bill Burns borrowed $170,000 from the New National Bank on a 6-month,6% note.Assuming no interest has been recorded yet,what is the amount of accrued interest as of December 31,2015?

Correct AnswerverifiedShow Answer

John Smith works 40 hours for ABC Corp.for $15 per hour.Required payroll deductions are: Social Security $37.20; Medicare $8.70; Federal income tax $58; and State income tax $10.The entry to record his net pay would cause which of the following to change as described?

Correct AnswerverifiedShow Answer

Engstrom Company makes a sale and collects a total of $378,which includes an 8% sales tax.What is the amount that will be credited to the Sales Revenue account?

Correct AnswerverifiedShow Answer

On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds. Required: Fill in the table assuming the company uses effective-interest bond amortization.

Correct Answerverified * Carryin...View AnswerShow Answer

A 10-year bond that pays interest annually was issued at a $5,000 premium.The entry to record the payment of interest using straight-line amortization will include a ______ to Premium on Bonds Payable for ______ each period.

Correct AnswerverifiedShow Answer

Accruing a liability always involves expenses and liabilities.

Correct Answer
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* Carryin...
View Answer

A 10-year bond that pays interest annually was issued at a $5,000 premium.The entry to record the payment of interest using straight-line amortization will include a to Premium on Bonds Payable for each period.

Correct Answer
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