Liability
#2Which of the following is not a liability?
a. income tax payable
b. accrued vacation pay
c. allowance for bad debts
d. accrued warranties payable
c. allowance for bad debts (contra asset account)
#5 Connors Company paid $700 cash to make a repair on equipment it sold under a one-year warranty in the prior year. The entry to record the payment will debit
accrued warranty payable and credit cash
#29 Bonds with an 8% stated interest rate were issued when the market rate of interest was 5%. This bond was issued at
a premium
# 34 A bond with a face amount of $11,000 has a current price quote of 101.65. What is the bond’s price
11,181.50
#36 New England Company sells $250,000 of 12%, 10-year bonds for 78.6492 on April 1, 2018. The market rate of interest on that day is 16.5%. Interest is paid each year on April 1. The entry to record the sale of the bonds on April 1 would be?
cash 196,623
discount on bonds payable 53,377
bonds payable 250,000
#3Notes payable due in six months are reported as
a. contra assets on the income statement
b. current liabilities on the balance sheet.
c. long term liabilities on the balance sheet
d. current liabilities on the income statement
b. current liabilities on the balance sheet
#9 A company reports purchases of $370,000, a beginning accounts payable balance of $25,000, and an ending accounts payable balance of $49,000. All purchases were on account. The company's accounts payable turnover would be closest to: (Values are rounded to two decimal places, X.XX.)
5
#31 The Discount on Bonds Payable account
a. is a miscellaneous revenue account
b. is expensed at the bond's maturity.
c. is expense account.
d. is contra account to bonds payable
d. is contra account to bonds payable
#37 New England Company sells $150,000 of 10%, 20-year bonds for 76.134 on April 1, 2018. The market rate of interest on that day is 13.5%. Interest is paid each year on April 1. The issue price of the bond is $114,201. New England Company uses the straight-line amortization method. The amount of interest expense for each year will be
16,790
#39 The journal entry on the maturity date to record the retirement of bonds with a face value of $1,500,000 that were issued at a $70,000 discount includes
a debit to discount on bonds payable for 1,500,000
#6 Accounts payable turnover for Blue Industries increased from 10 to 12 during 2018. Which of the following statements best describes what this means?
The company paid its accounts payable more quickly in 2018, signaling a stronger liquidity position.
#10 Nicholas Corporation accrues the interest expense on a short-term note payable at the end of its fiscal year. Due to this transaction
Current liabilities will increase and stockholder’s equity will decrease.
#33 The carrying value of Bonds Payable equals
a. Bonds payable minus discount on bonds payable
b. Bonds payable minus premium on bonds payable
c. Bonds payable plus discount on bonds payable
d. Bonds payable plus accrued interest
a. bonds payable minus discount on bonds payable
#44 On January 1, 2020, Clifden Corporation issued $500,000, 12%, 10-year bonds. The bond interest is payable on January 1 and July 1. The bonds sold for $635,903. The market rate of interest when the bonds were issued was 8%. Under the effective-interest method, the interest expense for the six months ending July 1, 2020, would be closest to
25,436
#46 Delora Corporation retires its bonds at 109 on January 1, after the payment of interest. The face value of the bonds is $640,000. The carrying value of the bonds at retirement is $659,200. The entry to record the retirement will include a
debit of $19,200 to premium on bonds payable
#22 Potential liabilities that depend on future events arising out of past events are called
Contingent Liabilities
#13 Gravel Corporation borrowed $250,000 from a bank on January 1, 2019, by signing a 10%, six-month note. The journal entry made by Gravel on January 1, 2019, will debit and credit what?
Cash for $250,000 and credit notes payable for $250,000.
#45 When a company retires bonds early, the gain or loss on the retirement is the difference between the cash paid and what?
carrying value of the bonds
#24 Krause Company issued $325,000, 7%, ten-year bonds for 115, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?
368,875
#28 Mission Furniture issued $500,000 in bonds payable at par. The journal entry to record a semiannual interest payment on these bonds would
debit interest expense and credit cash
#14 Lester Corporation borrows cash by signing a $80,000, 6%, nine-month note on December 1 with its local bank. The total cash paid for interest (only) at the maturity of the note by Lester will be
3,600
#17 Camping Co. was organized to sell a single product that carries a 45-day warranty against defects. Engineering estimates indicate that 11% of the units sold will prove defective and require an average repair cost of $50 per unit. During Camping's first month of operations, total sales were 400 units; by the end of the month, twenty defective units had been repaired. The liability for product warranties at month-end should be
1,200
#47 Corporate bonds that can be exchanged for shares of the corporation's common stock if certain conditions are met are called
convertible bonds
#25 A bond with a face value of $220,000 and a quoted price of 96 has a selling price of
211,200
#40 If bonds are issued at a discount and the effective-interest method is used, the amount of interest expense
increase each period as the bonds approach maturity