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1.From a liquidity standpoint, it is more desirable for a company to have (Points : 1)
current assets equal current liabilities.
current liabilities exceed current assets.
current assets exceed current liabilities.
current liabilities exceed long-term liabilities.
Question 2.2.A corporation recognizes a gain or loss (Points : 1)
only when bonds are redeemed before maturity.
only when bonds are converted into common stock.
when bonds are redeemed at or before maturity.
when bonds are converted into common stock and when they are redeemed before maturity.
Question 3.3.Lulzbot.com sells 6,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $6,000. What amount should Lulzbot.com accrue on December 31 for estimated warranty costs? (Points : 1)
Question 4.4.If a corporation issued $3,000,000 in bonds which pay 5% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%? (Points : 1)
Question 5.5.A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called (Points : 1)
a bond indenture.
a bond debenture.
trading on the equity.
a term bond.
Question 6.6.A note payable is in the form of (Points : 1)
a contingency that is reasonably likely to occur.
a written promissory note.
an oral agreement.
a standing agreement.
Question 7.7.On January 1, 2014, Mazzeo Company, a calendar-year company, issued $1,600,000 of notes payable, of which $400,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is (Points : 1)
Current Liabilities, $1,600,000.
Long-term Debt, $1,600,000.
Current Liabilities, $800,000; Long-term Debt, $800,000.
Current Liabilities, $400,000; Long-term Debt, $1,200,000.
Question 8.8.If the market interest rate is 5%, a $10,000, 6%, 10-year bond, that pays interest semiannually would sell at an amount (Points : 1)
less than face value.
equal to face value.
greater than face value.
that cannot be determined.
Question 9.9.The following totals for the month of April were taken from the payroll register of Asplend Company.
Salaries and wages $72,000
FICA taxes withheld 5,508
Income taxes withheld 15,000
Medical insurance deductions 2,700
Federal unemployment taxes 192
State unemployment taxes 1,296
The entry to record the accrual of federal unemployment taxes would include a (Points : 1)
credit to Federal Unemployment Taxes Payable for $192.
debit to Federal Unemployment Taxes Expense for $192.
credit to Payroll Tax Expense for $192.
debit to Federal Unemployment Taxes Payable for $192.
Question 10.10.The interest charged on a $400,000 note payable, at the rate of 8%, on a 90-day note would be (Points : 1)
Question 11.11.On January 1, 2014, Key Company, a calendar-year company, issued $250,000 of notes payable, of which $62,500 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is (Points : 1)
Current Liabilities, $250,000.
Long-term Debt , $250,000.
Current Liabilities, $62,500; Long-term Debt, $187,500.
Current Liabilities, $187,500; Long-term Debt, $62,500.
Question 12.12.Autumn Company purchased a building on January 2 by signing a long-term $630,000 mortgage with monthly payments of $5,400. The mortgage carries an interest rate of 10 percent.
The entry to record the first monthly payment will include a (Points : 1)
debit to the Cash account for $5,400.
credit to the Cash account for $5,250.
credit to the Mortgage Payable account for $5,400.
debit to the Interest Expense account for $5,250.
Question 13.13.When an interest-bearing note matures, the balance in the Notes Payable account is (Points : 1)
less than the total amount repaid by the borrower.
the difference between the maturity value of the note and the face value of the note.
equal to the total amount repaid by the borrower.
greater than the total amount repaid by the borrower.
Question 14.14.Pan Company received proceeds of $188,000 on 10-year, 6% bonds issued on January 1, 2013. The bonds had a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Pan uses the straight-line method of amortization.
What is the amount of interest expense Pan will show with relation to these bonds for the year ended December 31, 2014? (Points : 1)
Question 15.15.Bond interest paid is (Points : 1)
higher when bonds sell at a discount.
lower when bonds sell at a premium.
the same whether bonds sell at a discount or a premium.
higher when bonds sell at a discount and lower when bonds sell at a premium.
Question 16.16.Koppernaes Company has total proceeds (before segregation of sales taxes) from sales of $9,540. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is: (Points : 1)
Question 17.17.Sales taxes collected by a retailer are recorded by (Points : 1)
crediting Sales Tax Revenue.
debiting Sales Tax Expense.
debiting Sales Taxes Payable.
crediting Sales Taxes Payable.
Question 18.18.Autotether, Inc. sells 1,200 units of a product that has a one-year warranty on parts. The average cost of honoring one warranty contract is $60. During the year 60 contracts are honored at a cost of $3,600. It is estimated that 120 contracts will be honored in the following year. The adjusting entry at the end of the current year will include a (Points : 1)
credit to Warranty Liability for $7,200.
credit to Warranty Liability for $10,800.
debit to Warranty Expense for $3,600.
debit to Warranty Expense for $10,800.
Question 19.19.A bond with a face value of $200,000 and a quoted price of 102 1/8 has a selling price of (Points : 1)
Question 20.20.From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that (Points : 1)
bond interest is deductible for tax purposes.
interest must be paid on a periodic basis regardless of earnings.
income to stockholders may increase as a result of trading on the equity.
the bondholders do not have voting rights.