accounting test number #3 questions

Which of the following is not an example of an accrued liability?

Accounts payable

Which of the following is not a current liability

Bonds payable due in 5 years

Warranty Expense is

recorded in the period

All of the following represent taxes commonly collected by businesses from customers except

unemployment taxes

When a credit is made to federal income taxes withholding payable account related to taxes withheld from an employee the corresponding debit is made ti

wages expense

when should a contingent liability be recognized

when a reasonable estimation can be made and when the contingent liability is probable

Bonds are a popular source of financing because

bond interest expense is deductible for tax purposes, while dividends paid on stock are not

When bonds are issued by a company, the accounting entry typically shows an

increase in assets and an increase in liabilities

Bower company sold $100,000 of 20 year bonds of 95,000. the stated rate on the bonds was 7% and interest is paid annually on dec 31 what entry would be made on December 31 when the interest is paid

interest expense discount on bonds payable cash

bonds are sold at a premium if the

market rate of interest was less than the stated rate at the time of issue

when bonds are issued at a premium, the interest expense for the period is the amount of interest payment for the period

minus the premium amortization for the period

ABC advisor is being sued by a former customer. Abc's lawyer say that us possible but not probable that the company will lose the lawsuit and the trial should last approximately 18 more months. should ABC lose, they will most likely have to pay approximately 750,000. How should this lawsuit be reported in the financial statements.

no effect on the balance sheet or income statement, but described in the footnotes

Which of the following transactions would cause the current ratio to increase (assuming the current ratio is currently greater than I)

paid off a payable

when bonds are issued at a discount , the interest expense for the period is the amount of interest payment for the period

plus the discount amortization for the period

how is the current ratio calculated?

(cash + marketable securities/ current liabilities)

Sean Corp. issued a $40,000, 10-year bond, with a stated rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period?

1,600

Chapman Inc. purchased a piece of equipment in 2018. Chapman depreciated the equipment on a straight-line basis over a useful life of 10 years and used a residual value of $12,000. Chapman's depreciation expense for 2019 was $11,000. What was the original cost of the building?

122,000

Heston Company acquired a patent on January 1, 2013 for $75,000. The patent has a remaining legal life of 15 years, but Heston expects to receive benefits from the patent for only 5 years. What amount of amortization expense does Heston record in 2013 related to the patent?

15,000

Refer to the information for Cox inc above. what amount would cox record as depreciation expenses at December 31 2020, if the double declining balance method were used?

192,000

Refer to the information for Kinsella above. What journal entry should be made with respect to the interest payment on October 1 2020

Debit Interest expense 15,000; debit interest payable 5,000 credit cash 20,000

Kramerica Inc. sold 350 oil drums to Thompson Manufacturing for $75 each. In addition to the $75 sale price per drum, there is a $1 per drum federal excise tax and a 7% state sales tax. What journal entry should be made to record this sale?

Debit accounts receivable 28,438; credit excise taxes payable (federal) 350; credit sales taxes payable (state) 1,838; credit sales revenue 26,250.

Kinsella seed borrowed 200,000 on October 1, 2019, at 10% interest. The interest. The interest and principle are due on October 1, 2020. refer to the information for Kinsella seed above. What journal entry should be recorded on December 31, 2019

Debit interest expense 5,000; credit interest payable 5,000

Payroll taxes typically include all of the following except

Federal excise taxes

When reporting liabilities on a balance sheet in theory, what measurement should be used?

Present value of the present outflow

the result of using the effective interest method of amortization of the discount on bonds is that

a constant interest rate is charged against the debt carrying value

What best describes the discount on bonds payable account

a contra liability

To record warranties the adjusting journal entry would be

a debit to warranty expense and a credit to warranty expense

Installment bonds differ from typical bonds in what way?

a portion of each installment bond payment pays down the principal bonds

if bonds are issued at 101.25, this means that

a.1,000 bond sold for 1,012.50

serenity company issued $100,000 of 6%, 10-year bonds when the market rate if interest was 5%. The proceeds from this bond issue were $107,732. Using the effective interest method of amortization, which of the following statements is true? assume interest is paid annually.

amortization of the premium for the first interest period will be $613

The premium on bonds payable account is shown on the balance sheet as

an addition to a long-term liability

Liabilities are recognized in exchange for

borrowing money, service, goods

how is the current ratio calculated?

current assets/current liabilities

Howton paper company purchased 1,400,000 of timberland in 2018 for its paper operations. Howtons estimates that there are 10,000 acres of timberland, and it cut 2,000 races in 2019. The land is expected to have a residual value of 200,000 once all the timber is cut. Which of the following is true with regard to depletion

depleletion will cause howton's timber inventory to increase

When depreciation is recorded each period, what account is debited?

depreciation expense

The cost principle requires the companies record fixed assets at:

historical cost

Which of the following is not an intangible asset?

research and development

Normal repair and maintenance of an assets is an example of what?

revenue expenditure

Which of the following statements regarding bonds payable is true?

the entire principal amount of most bonds mature on a single date

Which of the following statements is true regarding depreciation methods?

the use of higher estimated life and a higher residual value will lower the annual amount of depreciation expense recognized on the income statement

in 2019, drew company issued $200,000 of bonds for $189,640. If the states rate of interest was 6% and the yield was 6.73% how would drew calculate the interest expense for the first year on the bonds using the effective interest method.

189,640*6.73%

Refer to the information for Cox Inc, above. what amount would cord record as depreciation expense for 2019 if the units of production method were used round your nearest dollar answer?

218,400

Refer to the information for Cox inc. above. What would be the balance in the accumulated depreciation account at December 31, 2020, if the straight-line method were used?

312,000

Jerabek Inc. decided to sell one of its fixed assets that had a cost of $55,000 and accumulated depreciation of $35,000 on July 1, 2013. On that date, Jerabek sold the fixed asset for $15,000. What was the resulting gain or loss from the sale of the asset?

5,000 loss

Marianne Company purchased a machine on February 1 2015, for 100,000. In January 2019, when the book value of the machine is 70,000, Marianne believes the machine is impaired due to recent technological advances. Marianne expects the machine to generate future cash flow of 10,000 and has estimated the fair value of the machine be 55,000. What is the loss from impairment?

55,000-70,000

Bradley Company purchased a machine for 34,000 on January 1, 2017. It depreciates the machine using the straight line method over a useful life 8 years and a 2,000 residual value. On January 1, 2019, Bradley revised it's estimate of residual value to 1,000 and shortened the machines useful life to 4 years. Depreciation expense for 2019.

6,250

bonds in the amount of $100,000 with a life of 10 years were issued by the round company, if the stated rate 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds

60,000

Anniston Company purchased equipment and incurred the following cost, what is the cost of the equipment? purchase price 68,500 cost of trial runs 400 installation costs 325 sales tax 3,425

72,650