ACC 201 - Chapter 10 Quiz

A company whose current liabilities exceed its current assets may have a liquidity problem.

True

Interest on a $100,000 note payable, at the rate of 6%, on a 60-day note would be:

$1,000

Sales taxes collected by a retailer are recorded as:

a credit to SALES TAX PAYABLE

If bonds are issued at a discount, it means that the:

market interest rate is higher than the contractual interest rate.

Most companies pay current liabilities:

out of current assets

Unearned Rent Revenue is:

reported as a current liability

Bonds that may be exchanged for common stock at the option of the bondholders are called:

Convertible Bonds

Notes payable usually require the borrower to pay interest.

True

Sales taxes collected from a customer by Wal-Mart are expenses:

of the customer

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

True

On JAN 01, BobCo borrows $100,000 from a bank by signing a $100,000, 8%, 6-month note. On JAN 01 BobCo records this transaction as:

Debit- Cash 100,000 Credit- Notes Payable 100,000

The contractual interest rate is always stated as a(n):

annual rate

Any balance in an unearned revenue account is reported as a(n):

current liability

The entry to record an installment payment on a long-term note payable is:

debit NOTE PAYABLE debit INTERET EXPENSE ... AND ... credit CASH

Secured bonds are bonds that:

have specific assets of the issuer pledged as collateral

Which of these is NOT a "Payroll Tax Expense" for businesses? (consists of FICA tax, federal unemployment tax, and state unemployment tax)

health insurance

The relationship between current liabilities and current assets is:

useful in evaluating a company's liquidity.

A $1,000 face value bond with a quoted price of 97 is selling for:

$970

A cash register tape shows cash sales of $2,500 and sales taxes of $150. The journal entry to record this information is:

Debit- Cash 2,650 Credit- Sales Revenue 2,500 Credit- Sales Tax Payable 150

Each bondholder may vote for the board of directors in proportion to the number of bonds held.

False

Which one of these payroll taxes is not a payroll tax expense of the employer?

Federal Income Tax

If the market interest rate is greater than the contractual interest rate, bonds will sell at a discount.

True

From a liquidity standpoint, it is more desirable for a company to have their:

current assets exceed current liabilities.

From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that:

interest must be paid on a periodic basis regardless of earnings.

Each payment on a mortgage note payable consists of:

interest on the unpaid balance of the loan and reduction of loan principal