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Exam 10: Liabilities

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Question 111

Multiple Choice

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Interest expense on an interest-bearing note is

A) always equal to zero.
B) accrued over the life of the note.
C) only recorded at the time the note is issued.
D) only recorded at maturity when the note is paid.

E) A) and B)
F) B) and C)

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Question 112

Multiple Choice

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207. When the effective-interest method of bond premium amortization is used, the

A) amount of premium amortized will get larger with successive amortization.
B) carrying value of the bonds will increase with successive amortization.
C) interest paid to bondholders will increase after each interest payment date.
D) interest rate used to calculate interest expense will be the contractual rate.

E) A) and C)
F) A) and B)

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Question 113

Multiple Choice

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On October 1, 2015, Pennington Company issued a $90,000, 10%, nine-month interest-bearing note. If the Pennington Company is preparing financial statements at December 31, 2015, the adjusting entry for accrued interest will include a:

Notes payable usually are issued to meet long-term financing needs.

If $150,000 face value bonds are issued at 103, the proceeds received will be $103,000.

A debt that is expected to be paid within one year through the creation of long-term debt is a current liability.

In the balance sheet, mortgage notes payable are reported as

Bonds that may be exchanged for common stock at the option of the bondholders are called

Hardy Company has current assets of $95,000, current liabilities of $100,000, long-term assets of $180,000 and long-term liabilities of $80,000. Hardy Company's working capital and its current ratio are:

Advances from customers are classified as a(n)

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

Lark Corporation retires its $800,000 face value bonds at 104 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $829,960. The entry to record the redemption will include a

219. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (ii) ?

Sales taxes collected by a retailer are recorded by

230. On January 1, 2015, $3,000,000, 5-year, 10% bonds, were issued for $2,916,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

In most companies, current liabilities are paid within

Bonds that permit bondholders to convert them into common stock at their option are known as callable bonds.

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

The market interest rate is often called the

229. Dart Company issued $600,000 of 8%, 5-year bonds at 105, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?