Question 1

In October,you borrow $50,000,repayable in five years,at 8% annual interest,in order to buy new equipment.In March and again in September of the following year you pay half the annual interest to your creditors.Assuming no other long-term debt,what is the initial balance in the long-term debt account?

Accepted Answer

A)  $54,000
B)  $50,000
C)  $46,000
D)  $52,000E) None of the above
F) A) and B)

Question 2

The market interest rate on a bond is also known as the effective interest rate or yield.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 3

A company sells a bond with a face value of $10,000 and receives a premium of $800.Using the bonds payable,net shortcut,the company would make the following journal entry:

Accepted Answer

A)  Debit Cash for $10,800 and credit Bonds Payable,net for $10,800.
B)  Debit Cash for $10,800,credit Bonds Payable,net for $10,000,and credit Bond Premium for $800.
C)  Debit Cash for $10,000 and debit Interest Expense for $800,credit Bonds Payable,net for $10,000 and credit Bond Premium for $800.
D)  Debit Cash for $10,000,debit Interest Expense for $800,credit Bonds Payable for $10,000 and credit Bond Premium for $800.E) A) and B)
F) B) and C)

Question 4

Which of the following is true about measurement of liabilities?

Accepted Answer

A)  ASPE only allows the use of effective-interest method.
B)  ASPE only allows the use of only straight-line method.
C)  IFRS only allows the use of only effective-interest method
D)  IFRS only allows the use of only straight-line method.E) All of the above
F) A) and C)

Question 5

At the beginning of the first quarter,your company borrows $20,000 for four years at 8% interest and has to repay $5,000 of principal each year.Interest is paid at the end of the second and fourth quarters,and the principal is due at the end of the year.How would this information be reported on the balance sheet at the end of the first quarter?

Accepted Answer

A)  $400 as interest expense and $20,000 under long-term debt.
B)  $400 as interest payable,$5,000 as current portion of long-term debt under current liabilities,and $15,000 under long-term debt.
C)  $1,600 of interest under current liabilities,$5,000 as current portion of long-term debt under current liabilities and $15,000 under long-term debt.
D)  $400 as interest payable under current liabilities and $20,000 under long-term debt.E) B) and D)
F) None of the above

Question 6

If the market rate of interest is 6%,a $10,000,10-year bond with a stated annual interest rate of 8% would issue at an amount:

Accepted Answer

A)  less than face value (discount) .
B)  equal to the face value (par) .
C)  greater than face value (premium) .
D)  that cannot be determined.E) All of the above
F) B) and C)

Question 7

When the amount of a contingent liability can be estimated and it is likely,the company should:

Accepted Answer

A)  include a description in the footnotes to the financial statements.
B)  record the estimated amount of the liability times the probability of its occurrence.
C)  record the liability and estimated amount of the loss on the balance sheet.
D)  omit the information about the contingent liability from its financial statements and footnotes.E) All of the above
F) C) and D)

Exam 10: Liabilities

Correct Answer
verified

A company sells a bond with a face value of $10,000 and receives a premium of $800.Using the bonds payable,net shortcut,the company would make the following journal entry:

Correct Answer
verified

When the amount of a contingent liability can be estimated and it is likely,the company should:

Correct Answer
verified

If the market rate of interest is 6%,a $10,000,10-year bond with a stated annual interest rate of 8% would issue at an amount:

Correct Answer
verified

The market interest rate on a bond is also known as the effective interest rate or yield. BT: Knowledge

Correct Answer
verified

Which of the following is true about measurement of liabilities?

Correct Answer
verified

Correct Answer
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Exam 10: Liabilities

Correct AnswerverifiedShow Answer

A company sells a bond with a face value of $10,000 and receives a premium of $800.Using the bonds payable,net shortcut,the company would make the following journal entry:

Correct AnswerverifiedShow Answer

When the amount of a contingent liability can be estimated and it is likely,the company should:

Correct AnswerverifiedShow Answer

If the market rate of interest is 6%,a $10,000,10-year bond with a stated annual interest rate of 8% would issue at an amount:

Correct AnswerverifiedShow Answer

The market interest rate on a bond is also known as the effective interest rate or yield. BT: Knowledge

Correct AnswerverifiedShow Answer

Which of the following is true about measurement of liabilities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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