FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 7: Accounting for Liabilities

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

Monthly remittance of sales tax:

A) Reduces liabilities.
B) Is a claims exchange transaction.
C) Reduces stockholders' equity.
D) All of these answer choices are correct.

E) All of the above
F) C) and D)

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Bonds payable are usually classified on the balance sheet as:

A) current liabilities.
B) long-term liabilities.
C) investments and funds.
D) other assets.

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

Correct Answer

verified

Show Answer

Question 23

True/False

Review LaterAdd Note

Companies that issue bonds are required to pay the face value of the bonds at maturity and to make fluctuating periodic interest payments based on the market rate of interest.

The Platte Corporation issues a 5-year note payable on January 1, Year 1 for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following correctly shows the effects of the December 31, Year 2 payment (rounded to the nearest whole dollar) ?

A line of credit typically has an interest rate that is fixed (constant) for the length of the agreement.

Straight-line interest amortization of a premium or discount on bonds payable:

Pace Company issued at 97 bonds with a face value of $200,000. As a result of the issue:

For a long-term note payable, repaying a portion of principal along with interest payments is called loan amortization.

A classified balance sheet is one that distinguishes between operating and non-operating assets.

Which of the following correctly describes an installment note?

Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet?

Park Enterprises issued bonds with a term of 5 years and a face value of $500,000, receiving cash of $508,000. The bonds pay interest once a year, with an annual rate of 7%. Assuming straight-line amortization, the amount of interest expense for the first year would be $31,600.

Benitez Co. had sales of $800,000 in Year 1. The company expects to incur warranty expenses amounting to 3% of sales. There were $13,000 of warranty obligations paid in cash during Year 1. Based on this information:

Vacation pay is considered a contingent liability to the extent that the obligation exists due to work already performed.

Regardless of the specific type of long-term debt, which of the following is normally required with debt transactions?

If a bond is sold at 101, its stated rate of interest would be:

Issuing bonds payable when the market rate of interest is less than the stated interest rate:

Bruce Company experienced an accounting event that that increased interest expense, decreased the discount on bonds payable, and decreased cash. Which of the following choices accurately reflects how this event would affect Bruce's financial statements?

On January 1, Year 1, Burton Corporation recorded an event that increased its cash account by $196,000, increased its discount on bonds payable account by $4,000, and increased its bonds payable account by $200,000. Which of the following correctly describes that event?

Indicate whether each of the following statements about bonds payable is true or false. _____ a) At the time of issue, the effective interest rate of a particular bond is equal to the market rate of interest for bonds with a similar level of risk. _____ b) When bonds are sold at 105, the stated interest rate of the bonds is lower than the market rate for investments with a similar level of risk. _____ c) When bonds are sold at 95, the stated interest rate of the bonds is lower than the market rate for investments with a similar level of risk. _____ d) When bonds are sold at 100, the stated interest rate of the bonds is lower than the market rate for investments with a similar level of risk. _____ e) When bonds are sold at 101, the bonds were issued at a premium.