Acc chp 12 & 13 practice tests

Carla Vista company has a loss contingency. The companies legal counsel's opinion is that the contingency is probable and that they estimate that the amount of the loss will be $338,000. What is the proper accounting treatment for this contingency?

$338,000 should be accrued as a liability

The times interest earned ratio is computed by dividing

(Net income + interest expense and income tax expense)/ interest expense

Awesome company issued a 90 day zero interest-bearing note with a face amount of $3010. The present value of the note is $2855. The journal entry to record the issuance of the note will include.

A debit to cash for $155

Crane company issued a 90 day zero interest bearing note with a face amount of $6300 on November 1. The present value of the note is $5700. about the note, the adjusting journal entry on December 31 will require.

A debit to interest expense for $400

The generally accepted method of the counting for gains our losses from the early extinguishment update, is to compute them as

A difference between the reacquisition price and the neck, caring amount of the debt, which should be recognized in the period of redemption

Which of the following is included in employer payroll taxes?

All are correct- FICA taxes, federal unemployment taxes, state unemployment taxes

Which of the following is not an example of a current liability at December 31, 2026

Bonds payable due 12/28

Which of the following statements about bonds is not correct

Bonds usually pay interest annually Correct would be: bonds usually pay interest semi-annually

A bonfire with the issue where has the right to call in retire the bonds prior to maturity is a

Callable bond

Which of the following statements is false

Compensated absences are usually reported as a long term liability

Which of the following is not an example of off balance sheet financing?

Consolidated subsidiary Special purpose entity and I consolidated subsidiary are examples of off balance sheet financing

Federal income, taxes, withheld by the employer, on behalf of the employer or recorded as

Current liabilities

The entry to accrue a contingent liability

Debit an expense account

All of the following are typically classified as current liabilities, except

Deferred expenses

Which of the following statements regarding current liabilities is false?

Discount on Notes payable represents interest revenue to the issuer

Which of the following is not one of the requirements for accruing the cost of compensated absences?

Employee has been with the company for more than two years

Much of the accounting for bonds in long-term notes payable it's totally different between GAAP and IFRS

False

The effective interest rate method, calculates bond interest expense by multiplying the carrying value of the bands at the beginning of the period by the stated rate of interest

False

The journal entry to amortize the discount on a long term note is needed only if the note is zero interest bearing

False

Bellingham ink sans bonds with a face value of $100,000,000 and he stated interest rate of 8% for $92,278,000 to yield 10%. If the company uses the effective interest message of amortization interest expense for the first six months would be $4,000,000

False- 10% X 6/12 X 92,278,000= 4,613,900

An accounting for short term that expected to be where you financed the long-term debt, GAAP uses the financial statement issue in state, determine whether that that should be classified as short-term or long-term

False- balance sheet sage is used

The last recorded by the creditor in a troubled debt restructuring is based on the expected future cash flows discount at the current effective interest rate

False- discounted at historical effective interest rate

Best-efforts underwriting means that the investment bank guarantees, the proceeds of the bond issue will be a certain amount

False- firm underwriting guarantees this

The discount on zero interest-bearing note is amortized to interest expense only in the period the note is issued

False- it's amortized to interest expense over the life of the note

State and federal unemployment taxes are imposed on both employers and employees

False- only employees

When the effective interest rate of a bond is lower than the stated, interest rate the bond sells a discount

False- the bond sells at a premium

The entry for bond, premium amortization includes a debited interest expense in a credit to premium on bonds payable

False- the entry includes debits to both interest expense and the premium on bonds payable

If a company elects the fair value option for its long-term liabilities, a decrease in the fair value of a bond payable will result in an unrealized holding loss.

False. When the fair value of a bond decreases, the cost to settle the debt at that point has decreased, resulting in an unrealized holding gain to the issuing company.

Which of these is not included in an employers payroll, tax expense

Federal income taxes

Turn liabilities are usually recorded in the accounting records, and reported financial statements at their

Full maturity value

If a bond sells at 97 the market interest rate is

Greater than the stated interest rate

Which one of the following statements relating to mortgage notes payable is not correct?

Mortgage notes payable are always reported as a long-term liability.

Note disclosures for long term debt generally include all of the following except

Names of specific creditors

Gain contingencies are recorded when

None are correct- gain contingencies are never recorded

When a note is exchanged for property in a bargained transaction, the stated interest rate is presumed to be fair unless:

Not interest rate is stated, the stated interest rate is unreasonable, and the stated face amount of the note is materially different from the current cash sales price for similar items

Current liabilities are defined as alterations his liquidation it's reasonably expect it to

Require the use of current assets for the creation of other current liabilities

All of the following could result in an earned revenue, except

Sales on account at home depot

Which of the following is not true about the discount on short term notes payable?

The discount on payable account should be reported as an asset on the balance sheet

When bonds sell between interest pay dates, the purchaser will pay the seller

The price of the bond, plus the accrued interest

The numerator in the debt ratio is

Total liabilities

If a company elecest the fair value option for its long-term liabilities, an increase in the fair value of a bond payable will result in an unrealized holding off

True

The discount on short term zero and tress bearing notes, represents interest

True

The entry to record the collection of sales, tax by a retailer may include credits to both sales revenue, and sales tax payable

True

When revenue from gift card, breakages recorded no cost of good soles recognized

True

When revenue has been received, but the related performance obligation has not been completed, the amount is reported as a current liability.

True

A debenture bond is usually known as a

Unsecured bond

In determining the amount of a provision, a company using IFRS should generally measure

Using the best estimate of the amount of the law expected to occur

Both discount on bonds payable and premium on bonds payable are

Valuation accounts

Which of the following is not true regarding the fair value option

When a company elects the fair value option it must be applied to all financial assets and liabilities

A liability for compensated absences is

accrued only if specific conditions are met.

Liabilities are

obligations arising from past transactions and payable in assets or services in the future.

A long term note is valued at its

present value

A bond that matures in installments is called a

serial bond

Employer payroll taxes include all the following except

state income taxes