Accounting 2036 Chapter 10 Quiz solutions

When IBM issues a $1,000 bond at face value with a stated annual interest rate of 5 percent, it would record,

A credit to Bonds Payable for $1,000

When IBM issues a $1,000 bond at 108 percent of its face value with a stated annual interest rate of 5 percent, it would record,

A credit to Bonds Payable for $1,000 A credit to Premium on Bonds Payable for $80

Which of the following is NOT a key element of a bond?

Bond certificate number

What is the term for "A liability whose ultimate resolution depends on a future event?"

Contingent Liability

Payroll deductions create:

Liabilities for employer

Which of the following are long-term liabilities?

Long-term notes payable Deferred income taxes Bonds payable

Which of the following is NOT a key event when establishing a note payable?

Making loans to employees

What is an example of a contingent liability?

product warranty

Under accrual accounting, interest must be recorded:

over time

Assume on September 1, 2017, XYZ Co. borrowed $600,000 cash on a one-year note that required them to pay 8% interest and $600,000 principal, both on August 31, 2018. What amount of interest expense would have accrued by December 31, 2017?

$16,000

From the bondholder's perspective, the bond is

An investment

What is the proper way to record bond issued at a premium?

Debit Cash; Credit to Premium on Bonds Payable; Credit to Bond Payable

Which of the following terms describes when a bond is issued at an interest rate of 6%, and the market interest rate is currently at 9%?

Discount

Which of the following is TRUE about the times interest earned ratio?

It calculates whether a company generates enough income to cover interest expenses before the costs of financing and taxes.

Which of the following is NOT true about payroll deductions and taxes?

Payroll deductions are never required by law

If the cash received from the issuance of the bond is more than the face value, then the bond is being issued at a:

Premium

Which of the following is NOT a type of payroll deduction?

Sales tax

Complete the debt-to-assets ratio: ? / Total Assets.

Total liabilities